Firms still have to do further work to identify the full range of their benchmark activities and improve their management of the associated risks, the UK’s Financial Conduct Authority (FCA) says.
The FCA today publishes its thematic review of oversight and controls of financial benchmarks, which follows misconduct in relation to benchmarks, such as the Libor-fixing case when banks rigged the London interbank offered rate to boost profits.
The FCA says some progress had been made on improving the oversight and controls around benchmarks, but that application of the lessons learned from Libor and other cases had been “uneven across the industry and often lacked the urgency required given the severity of recent failings”.
Tracey McDermott, director of supervision – investment, wholesale and specialists, at the FCA, says: “Firms should have in place systems to manage the risks posed by benchmark activities and to address the weaknesses that have previously been identified.
“We recognise that this is a significant task and firms had made some improvements, but the consistency of implementation and speed at which these changes have been taking place is disappointing.”
The FCA found that firms were failing to identify a wide enough scope of benchmark activities by interpreting the definition of a benchmark given by the International Organization of Securities Commissions too narrowly.
In addition, some firms had not made sufficient effort to properly identify the conflicts of interest that could arise from their businesses and benchmark activities.
The FCA is writing to firms involved in the review to provide individual feedback.
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