With many headlines competing for the financial world’s attention already this year, it would be easy to overlook one of the most significant changes that will take place in 2021: the end of Libor in new contracts. Once dubbed “the world’s most important number,” Libor is a benchmark interest rate with mind-boggling reach, impacting trillions of dollars in business loans, student loans, mortgages and more. Although Libor’s use is pervasive, the transactions on which its publication is based are limited, and the rate needs to be replaced expeditiously this year.
Regulators and Libor’s administrator recently outlined an endgame for the rate. Two critical milestones in making that endgame a reality were reached on Monday: the implementation of a protocol that will fortify derivatives contracts and the close of a consultation on how to move on with minimal disruption.
