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Barclays’ US Deal Rewrites Libor Process
Financial Times | July 06, 2012 | 01:45 AM EDT

Barclays’ settlement with US regulators over the rigging of Libor is likely to have far-reaching implications for how benchmark interest rates are set in the future.

Under the terms of the pact with the US’ Commodity Futures Trading Commission , Barclays agreed to a six-pronged plan to “encourage” benchmark publishers, such as the British Bankers' Association , to improve the rate-setting process by increasing transparency and creating rigorous methodologies to determine submissions.

The pact is unusual because it requires Barclays to not only beef up its internal compliance systems but to take on a role as an advocate for increased oversight for the industry.

“We’re going to use every tool we can, whether it’s enforcement tools or rule-writing tools to try to benefit the American public and make sure markets are clean of fraud and manipulation,” said Gary Gensler, chairman of the CFTC.

Martin Wheatley, the UK regulator who has been asked by the UK government to lead a review of the legal framework for Libor and other rates, said his group would consider the CFTC’s demands. The BBA is conducting its own review and a person familiar with the progress said the settlement demands were “quite sensible” and could provide a template for reform.

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