EXTERNAL AUDIT GUIDELINES will be formed between the ICAEW and a new Libor administrator to make sure that robust assurance can be undertaken on the way inter-bank lending rates are set.
A review by Martin Wheatley (pictured), incoming chief executive of new financial services regulator the Financial Conduct Authority, into the Libor-rigging scandal has found that more damage would be done implementing a new regime – but serious reform is required.
Alongside the introduction of a new administrator to manage the Libor-setting process, a range of new measures need to be implemented.
Among the new measures, internal and external assurance will be central to checking that no Libor manipulation has taken place.
Wheatley recommends that the ICAEW work with the new Libor administrator "to ensure that their guidance informs and is consistent with the code of conduct". The ICAEW had previously announced plans to develop guidance for providing external assurance on interest rate benchmark submissions, which include Libor.
"Development of this guidance will ensure standardisation of assurance and audit across all participants, which will benefit contributing banks, the rate administrator and the regulatory authorities," the review stated.
"However, the review recognises that the systems and controls of banks are likely to be dynamic while a code of conduct is developed and implemented, but stresses the creation of this guidance should be in place when banks are required to obtain external assurance."
The review also calls for annual internal audit and compliance reviews of the processes behind Libor setting.
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