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Martin Wheatley, managing director of Britain’s Financial Services Authority, will head the new Financial Conduct Authority.

ANDREW WINNING/REUTERS

The setting of Libor will become a regulated activity and submitting false information or otherwise tampering with the interbank rate will be a criminal offence, the U.K. Treasury announced on Wednesday as it accepted, in full, the conclusions of an independent review of the crisis-ridden benchmark.

Sponsorship of the London Interbank Offered Rate, which serves as benchmark for $360-trillion (U.S.) in contracts worldwide, will be removed from the British Bankers' Association and handed to a new, regulated administrator, as Martin Wheatley, a top U.K. regulator, recommended last month.

The legal changes necessary will be included in the financial services reform bill, which is before parliament and is scheduled to receive royal assent early next year.

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The same legislation will also split the Financial Services Authority and hand responsibility for markets and enforcement – including Libor – to a new Financial Conduct Authority, headed by Mr. Wheatley.

The move is part of efforts to restore faith in Libor after a manipulation scandal that engulfed more than a dozen financial institutions on three continents. Barclays Bank PLC has already paid £290-million ($373-million) in fines over the issue and other banks are expected to face enforcement action.

UBS AG has said it has received partial immunity for co-operating with investigators and Royal Bank of Scotland PLC recently suspended a senior manager as part of its internal investigation.

"The government is determined to restore the credibility of Libor. That is why we have accepted Martin Wheatley's recommendations in full and will begin the process of implementing them without delay," said Greg Clark, City minister.

Lady Hogg, who heads the Financial Reporting Council, is leading a panel to select the successor to the BBA. The new administrator is expected to be in place before the end of this year.

Wednesday's announcement was not unexpected. Mr. Clark had previously praised the work of Mr. Wheatley, who will serve as chief executive of the FCA.

The review also recommended dropping 130 of the 150 daily fixings by eliminating rates for which there are few transactions. The new administrator is expected to handle that process.

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"The government's changes to legislation will ensure that those that attempt to manipulate Libor face the full force of the law. But this is just one part of the process, the banks and the BBA will have to play their part to ensure that reform is effective and Libor's reputation is restored," Mr. Clark said.

John Grout, policy director of the Association of Corporate Treasurers, said. "We are impressed by the government's speedy conclusion. The key now is implementation – and that must take account of the impact on users." He had previously called Mr. Wheatley's recommendations "spot on."

The BBA, which had formally asked the government to take Libor off its hands in the wake of the scandal, said: "The absolute priority now for everyone is to ensure the provision of a reliable benchmark which has the confidence and support of all users, contributors and global regulators, and we will work closely with the government and regulatory bodies to ensure this."

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