Libor will formally cease by the end of the year for most currencies, UK regulators said on Friday, a step that will raise the pressure on banks and assets managers to
The Financial Conduct Authority, which oversees the global benchmarks, said publication of Libor would cease at the end of 2020 for sterling, euro, Swiss franc and Japanese yen, and for one-week and two-month US dollar settings. will smooth the transition away from the tainted lending benchmark.
The industry has until June 2023 to extricate itself from $200tn of US dollar contracts tied to the benchmark, the FCA confirmed. The decision follows an industry consultation in December led by ICE Benchmark Administration, which compiles and oversees the daily rate.
Global authorities have pushed banks, asset managers and companies to stop using the rate, which measures the cost of unsecured borrowing between banks, by the end of the year in favour of benchmarks based on overnight rates.
Regulators say the benchmark reflects a market that no longer exists. From January banks will no longer be compelled to supply daily numbers that go towards Libor’s calculation.
The FCA had warned it could rule the Libor benchmark as unrepresentative if enough banks stopped supplying data. The regulator said on Friday it did not expect that any Libor settings would become unrepresentative before the new planned end dates.
Take-up for new dollar benchmarks have been slow in part because there are more loans and bonds tied to dollar Libor than any other currency. It is also a new rate, rather than an enhanced existing rate, which has been the case in other currencies.