The Institute of Chartered Accountants in
England and Wales (ICAEW) plans to provide auditors with guidance
on external assurance standards to prevent the rigging of
inter-bank lending rates.
ICAEW’s initiative comes in the aftermath of
the London inter-bank offered rate (LIBOR) scandal, which saw more
than sixteen banks allegedly misreporting this interest rate
Only Barclays has admitted the wrongdoing and the UK Financial
Services Authority (FSA) and the US Commodities and Futures Trading
Commission (CFTC) imposed fines that amounted to £290m ($460m).
Barclays’ chief executive Bob Diamond and the
bank’s chairman Marcus Agius were forced to resign as a consequence
of the misconduct.
The LIBOR scandal has prompted investigations
by US and European regulators into a number of financial
institutions such as HSBC, Lloyds, Citi or Deutsche Bank for
manipulating inter-bank lending rates.
ICAEW Financial Services Faculty head Iain
Coke said it is important to restore trust in these benchmarks as
they play a role in establishing rates for many loans and market
“External assurance can help provide that
trust by testing that there are robust processes in banks for
submitting rates to form the benchmark and that those processes are
being followed,” Coke commented.
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According to ICAEW, Barclays’ interest rate
benchmark submissions are subject to external assurance after its
settlement with the US CFTC.
The institute indicated many banks under
investigation may also be subject to similar requirements with
regulators but many others may voluntarily seek external assurance
to restore public confidence.
“We expect regulators to increasingly demand
independent assurance on important market benchmarks, such as
LIBOR; we hope to help auditors take a consistent approach
whichever rate and whichever markets they operate in,” Coke
ICAEW has set up a working party to issue an
exposure draft of the guidance, which it aims to publish by the end