Banks warned of capital add-ons for legacy Libor contracts

UK regulators’ letter to firms could be followed by Pillar 2 charge to speed transition to Sonia

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In a rush: the Bank of England wants transition away from Libor by 2021

Banks are being warned that supervisors – especially in the UK – could use additional capital requirements on contracts that reference Libor as a way to speed the transition to newer benchmarks considered less vulnerable to manipulation.

“The prospect of putting capital against potential Libor exposures may need to happen to get firms moving fast on this issue. That is probably only likely once the risk is identified and taken on balance sheet. If the large banks were to do this, then you could

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