The stringent new rules follow a government-commissioned review into the LIBOR scandal, which saw traders manipulating the interbank lending rate for profit.
The FSA’s Martin Wheatley (pictured), whose three-month probe into the LIBOR system will be published tomorrow, is to order urgent reform that will involve the FSA adding hundreds of City bankers to its “approved persons” list in order for them to continue their roles, according to Sky.
Wheatley’s report will also outline tough new sanctions for those found trying to rig the benchmark interest rates, but will not look to scrap the framework altogether, despite publicly branding it “not fit for purpose”.
His inquiry was commissioned by the Chancellor, George Osborne, in July, after Barclays was fined £290m for its role in rate rigging. Several other major banks are under investigation and are braced for possible hefty fines.
Earlier this week, the British Bankers’ Association agreed to step back from its role as LIBOR watchdog, to be replaced by a formal regulator which will oversee the lending rate.
At present, LIBOR is set by a panel of banks being asked the price at which they expect to borrow over 15 periods, but it does not ask the price at which they have actually borrowed, leaving it vulnerable to manipulation.
