Libor webinar playback: Schooling Latter on timing of ‘death notice’

Benchmark cessation could be announced this year, FCA official reveals – news that has moved the market

The panel

Edwin Schooling Latter, head of markets and wholesale policy, UK Financial Conduct Authority

Tom Wipf, vice-chairman of institutional securities, Morgan Stanley and chair of the Alternative Reference Rates Committee.

Duncan Wood, global editorial director, Risk.net.

Market-moving news was disclosed during this Risk.net webinar – originally broadcast on June 22, as part of Libor Virtual Week.

Edwin Schooling Latter, head of markets and wholesale policy at the UK’s Financial Conduct Authority, said an announcement on the cessation of Libor could come as soon as November or December this year – giving the market 12 months to prepare for the benchmark to be retired at the end of 2021.

Subscribers can read Risk.net’s coverage of the comments here, and listen to the whole discussion above.

Any announcement would trigger the calculation of a spread adjustment that is designed to smooth the transition to a new benchmark for derivatives contracts that still reference Libor. If the announcement is made at the end of this year, rather than the end of next year, then the spread adjustment would be calculated using a different five-year dataset – and markets began adjusting to this prospect following the webinar.

Schooling Latter was joined by Tom Wipf, vice-chairman of institutional securities at Morgan Stanley and chairman of the US Libor transition working group, the Alternative Reference Rates Committee.

Other topics covered in the webinar include the impact of the pandemic on transition timelines, and the demand for term versions of new risk-free rates – in the US, the slow growth of derivatives liquidity is holding back a term RFR, Wipf conceded.