Banks need to start preparing for the death of Libor in 2021 or a smooth transition away from the scandal-hit benchmark will be “highly unlikely” and pose considerable risks, a consultancy has warned.
Libor, or the London interbank offered rate, is used to price $240tn (£170tn) worth of financial products globally but is being slowly phased out as regulators transition to an alternative.
All 20 banks which submit quotes for Libor, including HSBC, Credit Suisse, JP Morgan and Lloyds, have promised to support the rate until then.
While that pledge has soothed concerns that Libor could suddenly vanish before 2021, consultants Oliver Wyman have warned banks that they face “major risks and administrative burdens” if they don’t start preparing for the changes immediately.
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