Why Won’t Libor Die? It’s Complicated
The broken interest rate benchmark still dominates derivatives trading. Regulators may need to be more forceful in persuading banks to drop it.
Changing rates.
Photographer: Thomas Coex/AFP via Getty Images
The funeral dates for Libor are finally set, with some sensible concessions that keep part of the suite of interest rates alive for longer than initially planned. Those exemptions must be strictly controlled so as not to impede a much broader acceptance of the replacement benchmarks. For now, that’s proving harder than even those most resistant to change might have expected. So market regulators need to step up efforts to force bankers and financiers to embrace Libor’s successors.
The London interbank offered rates fell into disrepute for being easily rigged by the traders charged with submitting borrowing costs. Plus, the underlying wholesale funding market they’re based on melted away during the global financial crisis. In mid-2017, the U.K.’s Financial Conduct Authority said they’d be phased out by the end of 2021.