Death by a thousand cuts

14 August 2017 By Swaha Pattanaik Follow @swahapattanaik

Obituaries for the discredited global benchmark are premature. Its successors will take years to become as ubiquitous as a rate that is still the basis for trillions of dollars of financial contracts. Breakingviews spells out the legal pitfalls – and the trading opportunities.

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A substitute for the widely-used Libor interest rate benchmark must be in place for banks to use by the end of 2021, Andrew Bailey, the head of Britain’s Financial Conduct Authority, said on July 27.

Libor benchmark rates are produced for five currencies – the U.S. dollar, euro, yen, sterling and the Swiss franc – with seven maturities quoted for each, ranging from overnight to 12 months. Rates are calculated on the basis of submissions by reference panels, each of which has between 11 and 17 contributor banks.

Libor used to be compiled by the now-defunct British Bankers' Association and was transferred to ICE Benchmark Administration (IBA), part of the Intercontinental Exchange, following a rigging scandal.

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