January 01, 2020 Feature

The Death of LIBOR and the Afterlife

By Gary A. Goodman and Alice F. Yurke

In July 2017, Andrew Bailey, chief executive officer of the UK Financial Conduct Authority (FCA), announced that the FCA would no longer require panel banks to make London Inter-Bank Offered Rate (LIBOR) submissions after the end of 2021. Since the early 1980s, LIBOR and other interbank-offered rates have acted as the reference rates for trillions of dollars in real-estate-secured and other loans, bonds, and securitizations and deposits and derivatives notional. This article provides an overview of LIBOR’s historical importance in the financial markets and describes certain challenges in transitioning to a new risk-free rate.

London's Big Ben

London's Big Ben

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