Libor review to weigh up criminal charges

A statement by the Treasury said Mr Wheatley should determine the scope of sanctions for abusing Libor and whether it should be extended to other rate-setting processes.

Mr Wheatley will recommend policies on the appropriate governance and structure of Libor and any alternative rate-setting practices.

The review will report to the Treasury by the end of the summer, with a view for changes to be included in the Financial Services Bill.

Mr Wheatley said he would publicise a discussion paper on 10 August and stakeholders will have four weeks to respond.

He said: “The findings of the FSA, in conjunction with the US Commodity Futures Trading Commission and the department of justice, relating to misconduct in respect of Libor and Euribor submissions are extremely serious in nature. This benchmark rate is used globally for trillions of dollars worth of financial contracts.

“Therefore it is clear that urgent reform of the Libor compilation process is required. Such reform may include amendments to the technical definitions used for Libor, the associated governance framework and the role of official regulation.”

The review will also consider whether similar measures are required for other existing benchmarks.

The FSA is separately investigating financial institutions suspected of being involved in rate manipulation.

Colin Jackson, director of London-based Baronworth Investment Services, said: “You cannot legislate against dishonesty. The banks are already heavily regulated. The only way to deal with this is through closer supervision.”