U.K.‘s FCA Says Banks Will Support LIBOR Through 2021

The U.K. Financial Conduct Authority (FCA) has confirmed that all 20 banks have agreed to support the London interbank offered rate (LIBOR), ensuring the sustainability of the rate until 2021.

According to a recent Financial Times article, the FCA's Chief, Andrew Bailey, previously said there were "serious questions" over the sustainability of LIBOR before the rate meets its inevitable post-scandal demise, raising concerns that the changeover could be disruptive.

However, on November 24th, the FCA said 20 banks had promised to stay on board until the end of 2021, by which time a market-based alternative is expected to replace LIBOR as a benchmark for valuing sterling-based derivatives and other financial products. According to their statement, the FCA "expects focus to turn towards developing alternative rates and working towards a transition that can be executed smoothly."

Last month, SFIG's LIBOR Task Force submitted a response to the Federal Reserve Board's request for information related to three potentially new reference rates. SFIG's comments included broad consensus to support the development of new benchmarks while highlighting several potential issues, including the need for the development of a term curve as well as a few operational concerns. If you would like to join the LIBOR Task Force, please contact Michael.Williams@sfindustry.org.

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