The demise of the world’s most-referenced benchmark may have been expected for some time, but phasing it out has been far from straightforward. The London interbank offered rate (Libor) has been ubiquitous in financial contracts including derivatives, bonds and loans for decades, with an estimated $260tn-worth of Libor-referencing contracts outstanding.
The benchmark’s problems — notably the 2012 rigging scandal that irreparably tarnished its reputation — are well documented. But its fate was sealed in July 2017 when Andrew Bailey, then chief executive of the UK’s Financial Conduct Authority (FCA; the body that supervises Libor’s administrator), announced that from the end of 2021 it would remove any obligation for Libor panel banks to submit data — effectively setting Libor on course to being wound down. Since then, markets have been grappling with shifting issuance to alternative benchmarks, which work very differently to Libor, and huge swathes of legacy contracts.
