Synthetic Libor faces legal obstacles

EU benchmark rules may thwart ‘tough legacy’ fix, reviving calls for blanket legislation

Synthetic-Libor montage

A possible fix for averting chaos in financial contracts most stubbornly welded to Libor may not be permissible under the European Union’s benchmark regulations.

A synthetic version of sterling Libor is under consideration by an industry working group as a last-ditch measure to future-proof so-called ‘tough legacy’ contracts, which cannot be renegotiated to reference successor benchmarks. Synthetic Libor would see the defunct benchmark continue publication under a formula-based methodology

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