Global securities regulators are joining the list of authorities planning policy responses to the LIBOR manipulation scandal.
The International Organization of Securities Commissions (IOSCO) said Friday that it has created a task force on financial market benchmarks, “In light of the significant issues raised by investigations into attempted manipulation of benchmarks and related enforcement actions.”
The board-level task force — which is to be chaired by Martin Wheatley, managing director of the UK Financial Services Authority (FSA), who is also leading a review of the issue for the UK Treasury; and, Gary Gensler, the chairman of the US Commodity Futures Trading Commission (CFTC) — will examine benchmark-related policy issues and develop global policy guidance and principles for benchmark-related activities for market regulators.
Its mandate includes: identifying benchmark-related issues across securities and derivatives, and other financial sectors, and defining the types of benchmarks that are relevant to financial markets; and to identify the relevant policy issues including: regulatory oversight of the process of benchmarking, processes and procedures for benchmark calculation, and constructing credible governance structures to address conflicts in the benchmark setting process, and ensuring transparency and openness in the benchmarking process.
In developing policy guidance and principles for financial market benchmarks, the task force will consider issues related to enforcement powers, information sharing, and sanctions regimes, it notes. It will also take into account other initiatives by policymakers on benchmarks and serve as the IOSCO representative, along with the chairman of the IOSCO board, Masamichi Kono, in any other international work on benchmarking.
IOSCO says that it is committed to taking necessary steps to prevent the manipulation of benchmarks and restore confidence in the use of those benchmarks in global financial markets. “Benchmarks are critical to the pricing of many financial instruments. Doubts about the integrity and accuracy of benchmarks will undermine market confidence, distort the real economy, and potentially cause losses to investors and market participants,” it says.
The task force is aiming to produce a consultation report towards the end of this year or early next year, and expects its work will take at least until the first quarter of 2013 to complete.
“Given the global nature and extensive use of benchmarks in a wide range of financial markets and products, it is important to develop internationally consistent principles that ensure their credibility and integrity,” noted Wheatley.