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Mark Gilbert

Monkeying With Libor

It would be simpler to refurbish the benchmark than kill it.
Photo by Keystone/Getty Images

Democracy, as Winston Churchill said, is the worst form of government except for all the others that have been tried. Regulators may discover the same is true of Libor as a benchmark for the cost of money.

Andrew Bailey, CEO of the Financial Conduct Authority, announced plans last month to phase out the London Interbank Offered Rates by the end of 2021. Because there aren't enough underlying transactions to base Libor on, banks have to use their judgment -- or, to be frank, guesswork -- to decide what the cost of borrowing should be.