King urges swift action on Libor reforms The Bank of England has called for the overhaul of the London interbank lending rate to start as soon as possible, after radical reforms were unveiled on Friday, while Martin Wheatley, the Financial Services Authority managing director in charge of the review, said bankers guilty of fixing Libor could be imprisoned in the future. Sir Mervyn King, BoE governor, said he welcomed the Wheatley Review's proposals, which include a reduction in the number of rates, a new administrator and tougher regulation. "The Bank very much welcomes the Wheatley Review's proposals to improve the functioning, governance and regulation of Libor and would want these to be implemented as soon as possible," he said. The governor added that the challenge of benchmarks based on thinly traded markets would need to be addressed further in the medium and longer term, especially when based on quotes. The Bank for International Settlements has agreed to set up a group of senior officials who will consult the market on the issue. Mr Wheatley told the BBC's Today programme on Friday morning that he expected to pursue action against individuals on Libor. Society has lost confidence in banks, in finance, in the whole system and we need to restore that. Society wants the people who commit these sorts of crimes to pay the price and if that includes jail for the most extreme fraud in the system then that's what should happen," he said Mr Wheatley will make a speech on Friday in the City, where he plans to say that Libor - which has more than $300tn in contracts linked to it worldwide - needs to be reset. Its reliability has been questioned since a manipulation scandal took in more than a dozen financial institutions and resulted in Barclays reaching a £290m settlement with UK and US regulators. "Libor needs to get back to doing what it is supposed to do, rather than what unscrupulous traders and individuals in banks wanted it to do," he said. His 10-point plan calls for five currencies and 130 of the 150 daily fixings to be dropped. Libor will still depend on daily estimates from banks of current interbank borrowing rates but it will be sponsored by a fully independent and regulated administrator, rather than the British Bankers" Association. The reforms could affect other interbank lending rates which are modelled on Libor. The Japanese Bankers Association, which runs a system modelled on the BBA's to establish the Tokyo Interbank Offered Rate, said it would use the Wheatley review as part of an ongoing study on compliance and governance. The industry group is aiming to announce the results of that study, begun in July, by the end of the year. Japan's chief financial market regulator, the Financial Services Agency, declined to comment on the Wheatley review. Last December the FSA ordered the Tokyo branches of UBS and Citi to suspend trading tied to Libor and Tibor for one week and two weeks respectively, after traders were found to have colluded on rate submissions. In July, Tadahiro Matsushita, former financial services minister, described the manipulation of Libor as a "serious problem that could undermine the fairness and transparency of the financial market." The Wheatley plan was welcomed by Matthew Fell, CBI director for competitive markets, who said restoring trust in Libor was an important step "towards the broader task of rebuilding confidence in banking." "Bringing Libor under an independent regulator will take away the notion that this was a system run by banks for the benefit of banks," he added. He also said that focusing it on the most liquid trades would "drastically reduce the scope for any manipulation, particularly at times of market stress." Stronger individual accountability, including through criminal sanctions, will provide a robust last line of defence. Additional reporting by Ben McLannahan in Tokyo