Policymakers in the U.K. are proposing to overhaul the regulation of financial benchmarks, which was developed in response to a wide-ranging market manipulation scandal that swept up many of the industry’s leading firms. Now, the U.K. is looking to scale back that regime.
Financial benchmarks around the world initially came under regulatory scrutiny in the wake of revelations that involved firms manipulating major financial benchmarks, such as LIBOR, to benefit their trading positions. As a result, the process of compiling and distributing benchmarks faced tougher regulation designed to restore confidence in the accuracy and integrity of these instruments, and the LIBOR benchmarks were ultimately eliminated altogether.
Now, the HM Treasury in the U.K. is proposing to scrap the benchmark regulation that it adopted in response to the scandal, and to replace it with a new approach that only regulates specific financial benchmarks that are deemed to pose a systemic risk.
In a paper setting out its proposals, the Treasury said the primary objective of its proposed new regime is to “address where benchmarks may pose significant and adverse risks to the integrity of the U.K. financial system and consumers, in a targeted and proportionate way.”
While the development of the existing framework helped shore up market confidence, and facilitated the transition away from LIBOR, the “financial landscape has evolved significantly [since the current regime was adopted in 2018], and the limitations of the regulation have become apparent over time,” the Treasury said.
As a result, it’s now seeking to scale back benchmark regulation, reduce regulatory burden and to allow firms to develop and use a larger crop of benchmarks, including foreign benchmarks — with a view to enhancing the global competitiveness of the U.K.’s financial sector.
“Reviewing the regulatory framework for benchmarks is an opportunity for the government to create a new, coherent and proportionate regime that reflects the evolving nature of benchmark use and administration and ensures that the U.K. remains internationally competitive with businesses and markets having access to a wide range of benchmarks,” it said.
In a statement, the Financial Conduct Authority (FCA) said it welcomes the proposed reform.
“We will consult on the regulatory requirements in due course. As we develop our regime, we will engage widely to inform our approach, including with benchmarks administrators, users, and other regulatory bodies,” the FCA said.
The consultation is open until March 11, 2026.