LONDON (Reuters) – The huge switch from the discredited Libor interest rate benchmark to a Bank of England alternative by the end of 2021 is probably progressing ahead of expectations and could boost London as a financial center, top regulators said.
Britain’s Financial Conduct Authority (FCA) has ordered banks and markets to stop using the London Interbank Offered Rate or Libor as a basis for pricing contracts.
Banks - World - Libor - Prices - Mortgages
Banks across the world have been fined about $9 billion for trying to manipulate Libor that prices mortgages, credit cards and other loans worth over $300 trillion across the world.
Market participants have said switching to the BoE’s Sonia overnight interest rate is too huge a task to meet the deadline.
Sonia - BoE - Transactions - Harder - Libor
Sonia is compiled by the BoE and based on actual transactions and seen as harder to manipulate than Libor, which is based on quotes supplied by banks.
FCA Chief Executive Andrew Bailey said the deadline was ambitious and aggressive, but necessary given that Libor remains fundamentally “fragile” and it should not be allowed to “limp on” year after year.
Front - Bailey - Bank - England - Event
“I think we are at least up to and if not probably somewhat ahead of where I’d hoped we would be on that front by now,” Bailey told a Bank of England event.
Some market participants say they cannot make the switch until there are “term” rates, or forward variants of Sonia that stretch out many months for use in some contracts.
Bailey - Work
Bailey said work was proceeding on creating...
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