FT: Death of LIBOR Exaggerated
The Financial Times writes "The demise of Libor is not a done deal for markets." They say, "Reports of the death of Libor may be exaggerated, particularly in US markets. The UK markets regulator, the Financial Conduct Authority, has set a rough timeline for banks to prepare for a transition away from the floating interest rate benchmark that is crucial to world markets. By the end of 2021, it will no longer require banks to contribute to its calculation for rates in sterling, it said. Yet that may not signal the passing of a number that over the last 30 years emerged as one of the pillars of global finance and, more recently, a symbol of its decay. Libor's administrator, the US's Intercontinental Exchange, will still be able to publish the dollar rate after that point, and analysts and trading executives say it may still be necessary. Five years is not long enough for banks to overhaul the $350tn of outstanding derivatives, loans and mortgages tied to the key reference rate, they say. Banks, companies, insurers, pension funds and consumers are among a multitude of participants that have swaps and debt that is regularly affected by changes in short-term interest rates in the money market. Libor for a term of one month and, more often, three months maturity are the cornerstones of the floating interest rate market for the broader economy and users of derivatives."
