LIBOR-exit: How is the Financial World Preparing for the Death of a Benchmark?

Abstract

In 2017, the United Kingdom’s Financial Conduct Authority (FCA) announced that by the end of 2021 it would no longer compel banks to provide the information necessary to determine the London Interbank Offered Rate (LIBOR). The move responded to a rate manipulation scandal and an overall diminution in underlying transaction volume. LIBOR, the rate that banks say they would pay to borrow from one another, is published daily for a number of currencies and tenors. LIBOR is used as a reference rate for hundreds of trillions of dollars’ worth of financial documents,4 some of which did not contemplate a world without it. As the financial world braces for the discontinuation of LIBOR, uncertain abounds. This paper delves into some of the measures taking place to attempt to smooth the transition to new reference rates.