The Financial Conduct Authority is disappointed that banks have not instituted much change in the wake of the interest rate-fixing scandal that have sparked calls for deeper reform.

The U.K. regulator says that firms have a lot of work to do to identify the scope of their benchmark activities and improve their management of the associated risks—

And if banks neglect to act on this, the industry will be exposed to another LIBOR, Forex or Gold case.  

While some progress has been made around oversight and control, FCA believe that banks are still failing to root out conflicts of interest issues and are interpreting guidance such as IOSCO definition too narrowly.

“We have seen widespread historic misconduct in relation to benchmarks. It is now critical that firms act to restore trust and confidence in the system,” said Tracey McDermott, director of supervision – investment, wholesale and specialists at the FCA. “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.”

FCA recommends that firms:

Continue to enhance governance and oversight of benchmark activity to reduce risk exposure;

Identify and manage conflicts of interest issues across the enterprise;

Benchmark activities in all business areas;

Establish oversight and controls for any in-house benchmarks even in areas they have not addressed; and implement appropriate training programmes.

The industry watchdog has launched investigations into the rigging of interest rates, foreign-exchange rates and gold in recent years, which lead to multi-billion dollar fines and penalties.