LIVE TV
ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2021
  • Personal Finance
    • PPF
    • Mutual Funds
    • Income tax
    • EPFO
    • Income Tax Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • Home Loan Calculator
    • SIP calculator
    • SWP Calculator
    • MF Returns Calculator
    • Lumpsum Calculator
  • India
    • Companies
    • Property
    • Startups
    • Uidai
  • Economy
    • Aviation
  • Tech
    • Mobiles
    • Apps
  • Auto
    • Cars
    • Bikes
  • Markets
    • Commodities
    • Currency
  • Jobs
  • Indian Railways
  • World
    • Economy
    • Politics
    • Markets
  • videos
  • photos
  • Authors
  • More ...
    • VIDEOS
    • PHOTOS
Business News » World News

Britain to scrap Libor rate benchmark from end-2021

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
Updated: Thu, Jul 27, 2017
05:39 pm
Reuters

A substitute for the widely-used Libor interest rate benchmark should be in place for banks to use by the end of 2021, the head of Britain`s financial markets watchdog said.

Libor, a daily rate in a range of currencies, is based on submissions from banks of interest rates they believe they would be charged by others for borrowing money. Banks have been fined billions of dollars for trying to manipulate the benchmark, forcing a rethink of its future.

The benchmark is used to price financial contracts worth $350 trillion, ranging from home loans to credit cards, and Bank of England Governor Mark Carney said this month that such a reference rate should in future be based on actual market transactions and not banks` judgements.

Andrew Bailey, chief executive of the Financial Conduct Authority, told an event in London on Thursday that work must "begin in earnest" on shifting to an alternative index, saying the end of 2021 would offer time to ensure a smooth transition.

"By having a date by which transition will need to be complete, however, we give market participants a schedule to plan to, and make it easier for them to engage as many counterparties and Libor users as is practicably possible."

Libor has to be replaced because there are too few transactions underpinning it, Bailey said, adding just 15 were executed in the whole of 2016 for one daily variant of Libor.

A Libor based on "expert judgement" of banks is fragile, and there is little prospect of the markets becoming substantially more active in the near future, Bailey said.

"In our view it is not only potentially unsustainable, but also undesirable, for market participants to rely indefinitely on reference rates that do not have active underlying markets to support them," Bailey said.

Banks have voluntarily agreed to keep contributing to Libor until 2021, but if this phase-out deadline was on course to be missed, there would be a "push" from the authorities, Bailey said, without elaborating.SONIA BECKONS

At least six bankers on both sides of the Atlantic have been sent to prison for manipulating Libor, although some in the United States are still awaiting sentencing.

Libor had been compiled by the now defunct British Bankers` Association, but following the rigging scandal, this was transferred to ICE Benchmark Administration (IBA), part of the Intercontinental Exchange.

ICE had no immediate comment on the FCA`s announcement.

The BoE has already been refining its overnight sterling funding rate SONIA, which is based on actual transactions and therefore seen as "near risk-free" and harder to manipulate, as a sterling Libor substitute.

Earlier this year a BoE industry working group backed SONIA, which the central bank administers itself, as the substitute for Libor.

There could also be a second substitute benchmark to measure bank credit risk and funding markets that is based on a mix of SONIA and a proxy bank credit risk measure, Bailey said.

Setting a date would focus minds in the same way that setting an end-2017 deadline to phase out Switzerland`s TOIS reference rate triggered serious work on moving to the new SARON rate, he added.

Banks and IBA could continue to produce Libor after 2021, if they wanted to. Existing financial contracts that reference Libor and go beyond 2021 could be amended.

The Federal Reserve is developing a home-grown benchmark based on the repurchase agreement or repo market as an alternative to dollar Libor, which is used in around $150 trillion of private and exchange-traded derivatives.

The European Central Bank said in May it could replace Euribor, a euro-denominated counterpart to Libor, with a reference rate of its own.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:

LATEST NEWS

PUBG Mobile India launch date: Rumours rage with this announcement; will the Battle Royale Game make comeback? Check latest report

Krunal, Hardik Pandya's father passes away, Baroda skipper leaves Syed Mushtaq bubble

Stocks to Buy: Tata Motors stock on a roll, gains 6 pct on Friday; Know why trends to remain bullish

World biggest Covid 19 vaccination drive: All you need to know about this mega drive

PM Narendra Modi launches world's biggest vaccination drive against COVID-19, Says don't pay heed to rumours—vaccines safe

INSANE 'Master' Box office collection! Vijay’s film opens with thunderous response in UAE; beats Wonder Woman 1984, Tenet

Amazon opens Alexa AI for firms to build their own assistants

Mid-cap Stock Picks With Anil Singhvi: Buy IRCTC, Trident and Speciality Restaurants shares for good returns

SBI, HDFC Bank, ICICI Bank, Axis Bank to Yes Bank, Maruti Suzuki car finance facility launched; bring home your dream car easily now

Earthquake today: 42 dead, 15,000 displaced in massive Indonesia quake

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
Copyright © Zee Media Corporation Ltd. All rights reserved