From Enforcement to Prevention: International Cooperation and Financial Benchmark Reform
Law and Financial Markets Review, Vol. 10, No. 2, pp. 83-101, 2016
46 Pages Posted: 24 Aug 2016
Date Written: August 24, 2016
The London Interbank Offered Rate and Forex scandals have shaken public trust in the global financial system. Despite the global nature of the scandals, the role of international cooperation in preventing financial benchmark manipulation has been surprisingly overlooked. Benchmark reform has tended to focus on structural changes to benchmark administration and regulation, with a particular emphasis on benchmark quality, methodology and governance. Where international cooperation has occurred, it has tended to operate ex post, in facilitating crossborder investigations after crises have already been revealed. Where ex ante cooperation has occurred, it has taken the form of high-level standard-setting. It is clear that further cooperation is needed to prevent misconduct rather than to merely punish it. This article addresses the question of international cooperation in the financial benchmark context and concludes that cooperative tools such as ad hoc discussions, supervisory colleges, equivalence measures and regulatory networks have the potential to bridge the preventative gap in this regard.
Keywords: financial benchmarks; enforcement; financial markets
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