The End of LIBOR
Interbank Offered Rates (IBORs) are interest-rate benchmarks used globally across financial markets as reference rates for pricing lending products. Effectively, the benchmark is the average rate at which contributing banks believe they can attract funding. However, key benchmark interest rates, including the London Interbank Offered Rate (LIBOR), are now under reform by international regulators.
Since 2014, the International Financial Stability Board has raised concerns about the continued use of LIBOR. Market manipulation and false reporting of global reference rates by some contributing banks were cited as risks to the stability of financial markets. These concerns were shared by the Bank of England’s Financial Policy Committee and on 27th July 2017 the UK’s Financial Conduct Authority (FCA), together with global regulators and central banks, announced that LIBOR would cease to be published after 31st December 2021. Banks are required to find alternative ‘risk-free’ interest-rate benchmarks for each of the LIBOR currencies and have been urged to stop issuing LIBOR-linked products well in advance of the 2021 deadline.
C. Hoare & Co. has already replaced all its LIBOR-linked, money-market investments maturing beyond 2021. We will engage directly with customers who have existing LIBOR-linked facilities* about the transition to approved alternative rates and we will continue to update all our customers as the transition period progresses.
If you would like to know more about IBORs, LIBOR, or how these changes may affect you, please contact your relationship manager who will be happy to help. The FCA has also published information on the LIBOR transition which you may find useful (https://www.fca.org.uk/markets/libor).
* A LIBOR-linked facility is one in which the rate applied to a facility is linked to a prevailing LIBOR rate.
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This article is published on the 29th July 2020 by C. Hoare & Co., 37 Fleet Street, London, EC4P 4DQ. C. Hoare & Co. is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority with firm reference 122093. The Financial Conduct Authority’s address is 12 Endeavour Square, London E20 1JN.