(iii.). The rules for governing LIBOR
Earlier I outlined the need to retain some level of judgement. But judgement needs to be explicitly and transparently linked to trade data wherever possible.
A number of my recommendations are therefore intended to establish strict and detailed processes for verifying submissions against hard data.
I expect that the first priority of the new administrator should be to introduce a code of conduct for submitters. This code of conduct should introduce specific guidelines prescribing that submissions be corroborated by trade data.
Submitting firms will be subject to new tough systems and controls that will be put in place. Transactions will need to be recorded and there needs to be a requirement for regular external audit of submitting firms.
The market also needs to know whether a submission has been made based on transactions or not.
Only with such rules and guidance can we ensure that the process has the much needed integrity.
Once the regulatory regime which I have described is up and running, this code of conduct should become industry-led, and regulator approved guidance.
Until this tender process has concluded, submitting banks should move to compliance with the submission guidelines presented in this report.

(iv.) Immediate Improvements to LIBOR
The recommendations that I have set out so far, are designed to generate extensive and lasting reform.
But a comprehensive approach to reforming LIBOR inevitably requires changes to be made immediately. LIBOR as a reference rate continues to function as we speak. So what changes should be made now, to strengthen the rate as quickly as possible?
My report sets out a number of recommendations for immediate changes to the way in which LIBOR is derived, designed to establish a link between transactions and submissions, something advocated by many stakeholders as a way of enhancing credibility.
We examined the volume of transactions underpinning each LIBOR benchmark and the variance across different maturities and currencies. Some of these contained very few trades and some LIBOR benchmarks are used for very few transactions.
I therefore recommend that the BBA, and in due course the new administrator, should remove those currencies and tenors from LIBOR, which lack a sufficient amount of trade data to corroborate submissions – we aim to phase out these rates over the next 12 months or sooner, where possible.
In particular, Australian, Canadian and New Zealand Dollars, as well as Swedish and Danish Krone will be phased out. We also aim to reduce the maturities published by removing some of the intermediate tenors, such as four, five; seven, eight; ten and eleven months. This emphasis on the liquid segments of the market will further strengthen the link between submissions and observable transactions. This will reduce the current number of LIBOR reference rates – 150 - down to 20 where we are confident there is a real market to underpin the rates.

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