UPDATE 1-Global body IOSCO to study Libor, other benchmarks

Fri Sep 14, 2012 5:53pm IST

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* Watchdogs to forge global guidance on benchmarks

* Energy market benchmarks likely to be eyed too

* CFTC's Gensler, FSA's Wheatley to lead task force

By Huw Jones

LONDON, Sept 14 (Reuters) - Global securities regulators are to study how the interest rate Libor, which was rigged by British banks including Barclays, and other money market benchmarks should be supervised and how they are set, to restore market confidence.

Barclays, hit with a record fine of more than $450 million in June, is widely expected to be the first of several banks punished for attempting to manipulate Libor - the London interbank offered rate.

It is the price at which banks say they could borrow from each other and is used as the basis for pricing about $350 trillion of products including some home loans and credit cards.

The Madrid-based International Organisation of Securities Commissions (IOSCO) said on Friday the board level taskforce will be headed by Martin Wheatley, managing director of Britain's Financial Services Authority, and Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission.

"Benchmarks in use across global financial markets constitute the very foundation of free, fair and transparent market transactions, and doubts over their integrity and sound operation must be removed," IOSCO chairman Masamichi Kono said.

The taskforce will publish a consultation report by early 2013 identifying "relevant benchmark-related policy issues and develop policy guidance and principles for benchmark related activities", IOSCO said in a statement.

It will look at enforcement powers, information sharing among regulators and sanctions regimes.

IOSCO members, which include top regulators from across the world, are required to implement the body's guidance and principles as a condition of membership.

Wheatley is due to publish his own recommendations for reform of Libor governance and setting on Sept. 28.

Other benchmarks IOSCO will look at are likely to include those for pricing oil.

The inclusion of a top U.S. regulator as co-chair of the IOSCO taskforce will help reassure the United States whose officials have criticised Britain for failing to heed their long standing concerns about the way Libor is set.

Libor is not directly supervised by regulators in Britain but is overseen by its sponsor, the British Bankers' Association (BBA).

Wheatley was expected to recommend direct supervision of Libor, scaling back the number of its variants, and the introduction of safeguards into how it is set.

Thomson Reuters, parent company of Reuters, has been calculating and distributing the rates for the BBA since 2005.

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