RegulationNov 24 2017

Banks to keep Libor alive until 2021

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Banks to keep Libor alive until 2021

The Libor rate will remain alive until 2021 after 20 banks agreed to support it.

This morning (24 November) the Financial Conduct Authority announced that Libor, which is used to price $350tn (£262tn)-worth of mortgages, loans and other transactions, would remain sustainable until it is phased out in four years' time.

Earlier this year FCA chief executive Andrew Bailey said Libor would be phased out by 2021 and replaced by a new benchmark following a transition period.

It follows a string of high-profile scandals in which the rate was manipulated by traders to boost their institutions’ profits.

While it is not yet clear what the alternative rate will be, Mr Bailey indicated the Sterling Overnight Index Average (Sonia) could serve as a new benchmark.

In a statement the FCA said: "The FCA welcomes the support and agreement of all banks to remain as submitters until 2021.

"Based on this support until the end of 2021, the FCA expects focus to turn towards developing alternative rates and working towards a transition that can be executed smoothly."

It added that Société Générale will step down from the dollar Libor panel and Crédit Agricole will step down from the yen panel.

Ray Boulger, senior technical manager at London-based John Charcol, said: "Very few residential mortgages use Libor. It is used in some buy-to-let mortgages but most tracker rates use Bank rate.

"Commercial mortgages will often be Libor-linked.

"The replacement of Libor is not going to have much impact on the residential market."

damian.fantato@ft.com