Lenders have been fined billions of dollars by regulators for attempting to rig the London interbank offered rate, or Libor, an interest rate benchmark used to price an estimated $450 trillion of financial contracts worldwide.
The scandal triggered a regulatory overhaul of how benchmarks are compiled, but the review by the Financial Conduct Authority found that banks and brokers were not applying the new standards in full.
Many lenders punished for rigging Libor were later fined for trying to rig currency market benchmarks.
The FCA’s review looked at all benchmarks apart from Libor and foreign exchange, which had already been closely scrutinised. It said the application of new standards laid down in the wake of the scandals had been uneven across the industry, and often lacked the urgency required given the severity of recent failings.
“Firms should have in place systems to manage the risks posed by benchmark activities and to address the weaknesses that have previously been identified,” said Tracey McDermott, the FCA’s director of supervision.
“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. Firms should take our findings on board and consider further steps to improve their oversight.”
Simon Morris, a financial services partner with law firm CMS, described the report as a “clear wake-up call” for London’s financial sector, the City.
“Benchmark manipulation came close to shattering the City’s reputation for good, so it’s surprising that the FCA has found a lax approach in some firms to putting things right,” he added.
“If things haven’t speeded up by the autumn we can expect the next round of multimillion-pound fines to commence.”
The FCA published a review of oversight and controls of financial benchmarks at 12 banks and brokers, carried out between August 2014 and June 2015.
It found that firms needed to continue strengthening governance and oversight of how they participate in compiling benchmarks.
“No firm had fully implemented changes across all benchmark activities. All firms still have work to do,” the review said.
There was evidence that fines have been effective in instigating change at firms, but not all of them could identify every benchmark they were involved in or ensure adequate controls aimed at making rigging harder.