05 July 2022 - Article
On July 27, 2017, the chief executive of the UK Financial Conduct Authority (FCA) announced that the London Interbank Offered Rate (LIBOR) would be phased out and replaced by an alternative reference rate by the end of 2021. Since the FCA took oversight of LIBOR in 2013, in the wake of scandals related to banks' manipulation of the benchmark rate, the rate's calculation has been tied increasingly to transactions in unsecured wholesale term lending to banks. The FCA has determined that continuing to rely on these transactions to set the LIBOR rate is potentially unsustainable, as unsecured wholesale term lending to banks occurs relatively infrequently in the market. A successor benchmark to LIBOR has not yet been agreed, but an alternative under consideration is the Sterling Overnight Average Index (SONIA). For more information, see https://www.fca.org.uk/news/speeches/the-future-of-libor.