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iosco on libor September 14, 2012

Posted by Bradley in : financial regulation , trackback

IOSCO has announced the establishment of a “Board Level Task Force on Financial Market Benchmarks” to be co-chaired by Martin Wheatley of the FSA (responsible for the UK’s Wheatley Review) and Gary Gensler of the CFTC. You can tell this is an important (Board Level) Task Force because all of its members are men.

The press notice states that:

Other international organizations and national regulators, such as the European Commission, UK Treasury, (Wheatley Review), Central Bank Governors of the Bank for International Settlement and the Global Financial Market Association, are also undertaking work on the benchmark issue.

The inclusion of the GFMA in this list of “international organizations and national regulators” seems a bit odd to me even though GFMA published a set of principles for financial market benchmarks a week ago. Much of the GFMA principles document is rather content free – a lot of high-minded language but not much apparent bite. The possible exception to this is the combination of record-keeping and independent review requirements for, among other matters, the calculation of the benchmark. If proper records were kept, and were discoverable in litigation, it would make it easier to figure out where any liability for rigging might lie. And this fact might discourage rigging. But although there’s not a whole lot of detailed substance to the principles there isn’t any less than you find in most transnational standards documents. The oddity is really in including the GFMA in this list as it’s not a national regulator, or an international organization in the same way that IOSCO and the Basel Committee are. It’s a private sector group. And given the failures in Libor etc seem to me mostly to have been failures of the private sector, including failures of governance at the BBA and in banks, that is a bit strange. On the other hand, given the recent focus on the culture of financial firms, the GFMA has a real incentive to be seen to care about standards.

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