29th July 2015
Some banks are displaying a lack of urgency in applying the lessons of the Libor and Forex scandals, the financial watchdog has warned.
The Financial Conduct Authority says that some progress has made in terms of improving oversight and control, but the watchdog is disappointed at the speed and consistency of progress.
However, the application of the lessons learned from the LIBOR, Forex and Gold cases to other benchmarks had been uneven across the industry and often lacked the urgency required given the severity of recent failings.
Tracey McDermott, director of supervision – investment, wholesale and specialists at the FCA says: “We have seen widespread historic misconduct in relation to benchmarks. It is now critical that firms act to restore trust and confidence in the system. Firms should have in place systems to manage the risks posed by benchmark activities and to address the weaknesses that have previously been identified.
“We recognise that this is a significant task and firms had made some improvements, but the consistency of implementation and speed at which these changes have been taking place is disappointing. Firms should take our findings on board and consider further steps to improve their oversight.”
The FCA found that firms were failing to identify a wide enough scope of benchmark activities i.e. bank activities based on various benchmarks. It was interpreting international standards devised by a group of international regulators known as International Organisation of Securities Commissions or IOSCO too narrowly.
In addition, some firms had not made sufficient effort to properly identify the conflicts of interest that could arise from their businesses and benchmark activities.
The regulator has written to the firms concerned demanding action. It says they need to continue to strengthen governance and oversight of benchmark activity; continue to identify and manage conflicts of interest; fully identify their benchmark activities across all business areas; establish oversight and controls for any in-house benchmarks where they have not done so; and implement appropriate training programmes.