Daily Management Review

Great Britain to abandon LIBOR by 2021


07/27/2017


Use of the London Interbank Offering Rate (LIBOR) will be discontinued by the end of 2021, as regulators and banks in the UK want to replace the rate with a more reliable system, reports Bloomberg.



pixabay
pixabay
Andrew Bailey, head of the Financial Conduct Authority (FCA), which regulates LIBOR, said that the benchmark is not reliable due to a lack of transactions to provide data.

Each business day, LIBOR is calculated by the British Banking Association based on data provided by the largest British banks on their estimated borrowing costs. The LIBOR rate is calculated for five currencies: the US dollar, the pound sterling, the Swiss franc, the Japanese yen and the euro.

LIBOR rates shape financial contracts for more than $ 350 trillion. The benchmark’s reliability was questioned because of a series of scandals. As previously reported, traders of a number of banks manipulated the rate, providing false data. Banks were fined for a total of about $ 9 billion, and several traders were sent to prison.

According to Bailey, the market that supports LIBOR, where banks provide unsecured loans to each other, is already "not sufficiently active" to determine a reliable rate, and it is necessary to find alternatives. In one case, banks that set the LIBOR rate for one of the benchmark versions made only 15 transactions in this currency during the entire 2016, noted the FCA’s head.

"The lack of active markets raises a serious question about the sustainability of LIBOR benchmarks," said Bailey, who is widely regarded as the next candidate to head the Bank of England. "If the active market does not exist, how can even the best benchmark measure it?"

The head of the Bank of England, Mark Carney, said earlier this month that LIBOR can no longer exist in its present form. The LIBOR alternative has not been selected yet. Theoretically, it can be replaced by the Sterling Over Night Index Average (SONIA), which is calculated on the basis of data on the rates of overnight bank loans in pounds sterling.

source: bloomberg.com






Science & Technology

China is developing technology to capture greenhouse gases

IEA: The growth of renewable energy is slowing

Google introduces new smartphone and beta Android Q

SpaceX’s Dragon Crew Capsule Test Met With Anomaly

New Security Study Finds Millions Use 123456 As Password For Email Accounts

The Devastating Panama Disease Could Spell Extinction For Bananas

Walmart to hire 4 thousand robot cleaners

Samsung Galaxy Fold: Expensive but fragile

USA and South Korea launch the first commercial 5G networks

Deliveries of AR/VR devices to grow by 54% in 2019

World Politics

World & Politics

Theresa May to resign on June 7

The Earth Is ‘Not On Track’ To Tackle Global Warming: The U.N. Secretary General

Is Finland’s aging population turning the country into Japan?

The United States will impose new duties on Chinese goods on Friday

Jyrki Katainen: EU is not a milk cow

Oil lobby and the planet's future

Trump files a lawsuit against Deutsche Bank and Capital One

Trump Urged Abe To Influence Japanese Auto Firm To Produce More Vehicles In The U.S.