Libor Troubles Deepen as Deadline for Benchmark’s Demise Approaches

Aug. 14th, 2020

Julia-Ambra Verlaine

Regulators and investors say transition remains on track despite setbacks including the Covid-19 pandemic

No one said replacing the London interbank offered rate would be easy, but many regulators and investors contend the cumbersome process remains on track despite setbacks including the coronavirus pandemic.

Regulators and investors say transition remains on track despite setbacks including the Covid-19 pandemic

No one said replacing the London interbank offered rate would be easy, but many regulators and investors contend the cumbersome process remains on track despite setbacks including the coronavirus pandemic.

Deeply rooted in markets after decades and linked to trillions of dollars of financial products, Libor is slated for replacement by the end of 2021. Policy makers and regulators moved to scrap the benchmark after concluding it was balky and prone to manipulation, as exposed by a 2012 scandal that led to convictions for some traders and penalties for numerous banks.

If the transition doesn’t go as planned, it could leave everyone worse off. Consumers could end up on the hook for increased payments on credit-card loans and other borrowings, while small businesses could face higher fixed rates for loans. About $190 trillion of interest-rate derivatives and $3.4 trillion of business loans are tied to the rate.

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