LIBOR is the most widely used global interest rate benchmark, and it is deeply embedded in global financial products. In recent years, the long-term viability of LIBOR has been undermined due to cases of rate manipulation, low volumes for underlying interbank transactions and the reluctance of panel banks to submit quotes used to calculate LIBOR.
The FCA has warned that:
- Publication of LIBOR is not guaranteed beyond 2021;
- Sustainability of LIBOR is in question due to the absence of active market support; and
- The cessation of LIBOR poses a financial stability risk without advanced preparation.
The LIBOR Procedures Update communicates the Board’s intent to ensure the institution is utilizing an appropriate replacement index.