Martin Wheatley Final Report
Introduction
Firstly I want to thank the Financial Secretary for his introduction. I also want to thank the Lord Mayor for allowing us to host this morning's event here in the heart of the City of London, a place built on a strong foundation of confidence and trust.

Confidence and trust are critical to financial markets. Whether it is something common-place like opening bank accounts or something as previously obscure as the London Interbank Offered Rate, or LIBOR. We need finance to work well – for consumers from all walks of life.
The reason we are here however is that we have been misled. The system is broken and needs a complete overhaul. The disturbing events we have uncovered in the manipulation of LIBOR have severely damaged our confidence and our trust – it has torn the very fabric that our financial system is built on.

Today we press the reset button, we need to:
•get back to what this reference rate is supposed to do;
•restore integrity to a globally important benchmark;
•make sure we get to a position where individuals act with integrity.
This is not a London issue. This is a global issue and is why I have been working in partnership with my counterparts in the US, Japan, Switzerland, the EU and elsewhere.
For my part, when the Chancellor of the Exchequer asked me to carry out this review on behalf of the UK Government; I was clear about the absolute importance, scale and challenge of this task. The shocking behaviour exposed by the FSA and others demonstrated that an independent review of LIBOR was needed.
We have carried out that work, with a thorough and considered look at what went wrong and what should be done to put things right.
But pressing reset is not as simple as pushing a button. Today I am publishing a 10-point plan for extensive and lasting reform of a broken system to restore the trust that has been lost. LIBOR needs to get back to doing what it is supposed to do, rather than what unscrupulous traders and individuals in banks wanted it to do.

First and foremost, I have concluded that LIBOR can be fixed through a comprehensive and far-reaching programme of reform. Although the current system is broken, it is not beyond repair, and it is up to us – regulators and market participants – to work together towards a lasting and sustainable solution.

LIBOR is used in a vast number of financial transactions; with a value of at least $300 trillion. The deep entrenchment of LIBOR as a reference rate in financial markets, and the subsequent effect on those markets in the event of a disruption to the rate, mean that any case for replacement entirely would have to prove that LIBOR is:
•beyond repair,
•that a better alternative existed at this moment in time,
•and critically, that an immediate and smooth transition to that alternative could be made.

I have concluded that none of these conditions have been met and that instead there is a clear case for comprehensively reforming LIBOR, rather than replacing it.
Secondly, I have concluded that LIBOR submissions should be supported by relevant trade data and proper record keeping.
Some degree of judgement will have to be retained, because even in the more liquid markets there is not enough daily data available to have a system in place that is entirely based on market transactions, particularly in times of stress.

But we can't allow the unfettered latitude that banks enjoyed previously. Much greater rigour and transparency must be introduced to the process of submission. Let me return to this point later.
And third, we must remember that LIBOR is a creation of the market, invented by the market for the market. It is clear that proper regulation and sanctions are needed and we stand ready to provide that, should the Government agree. But banks and market participants must play their part too.

My recommendations combine both long-term and immediate changes, which I will explain in detail.
The three broad areas that these recommendations cover are:
1.Regulation - Introducing a new regulatory structure for LIBOR, including criminal sanctions for those who attempt to manipulate it.
2.Governance – Transferring the oversight and governance role from the British Bankers' Association.
3.The rate itself - A range of technical changes to make the system work better, including streamlining a lot of the currencies and maturities currently used.

Today we begin to put this right. This responsibility will be taken forward by the new Financial Conduct Authority – which I will lead – and which will focus on making sure that financial services and markets function well, by promoting market integrity, consumer protection and effective competition.

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