The Bank of England has called “last orders” on the scandal-hit Libor interest rates as regulators push for financial institutions to transition away from the benchmark by 2021.
Deputy governor Dave Ramsden said good progress was being made and that getting on with the switch to alternative benchmark Sterling Overnight Index Average (Sonia) could be a boost for the City.
Global regulators, led by the Financial Conduct Authority (FCA) in the UK, have been encouraging banks to find alternatives after the Libor-rigging scandal, which saw global banks fined billions for manipulating the rate for profit, and a reduction in transactions.
But the FCA and the Bank were forced to issue a reminder last year as progress was moving slowly, with the rate still being used for derivatives, bonds, and loan contract worth more than £300 trillion
Speaking at a Bank of England event earlier today, Ramsden said: “The time for ‘last orders’ is now.
“Firms need to be focussed on what they need to do to be able to transact SONIA based products; and stop adding to their post 2021 Libor exposures.”
Speaking to Bloomberg, he added: “To be honest I see a possible advantage here for London, getting on and innovating with the new product, Sonia, the new infrastructure.
“This could be good for London as a financial centre.”
In September last year the Bank and the Financial Conduct Authority (FCA) ramped up efforts to accelerate the transition writing to chief executives asking for their plans to ditch the rate.
FCA chief executive Andrew Bailey said the transition was progressing ahead of expectations.
He said: “I think we are at least up to and if not probably somewhat ahead of where I’d hoped we would be on that front by now.”
But Bailey warned “nothing would be off the table” when it came to dealing with the legacy of contracts that still reference Libor after the end of 2021.