Libor transition and implementation – Special report 2019

A critical halfway stage has been reached on the Libor transition journey – at least in terms of timing. It’s just over two years since the UK’s top financial regulator called notice on the discredited benchmark. It’s also just over two years until the rate could cease to exist. When it comes to action, however, it’s not clear whether this halfway point is even in sight given a to-do list that never seems to stop growing.

Much has happened since mid-2017, when the UK’s Financial Conduct Authority (FCA) chair, Andrew Bailey, made life without Libor a reality by freeing panel banks from the shackles of Libor quote submission after 2021. Most crucially, perception has gradually shifted. Denial has been replaced by widespread acceptance that Libor’s days are numbered, accelerating efforts to embed regulator-preferred successor rates throughout the system.

There’s no magic fix, but some turbo-charged remedies look promising. For example, machine learning and natural language processing have already proved their worth in sifting through financial contracts and picking out those that may require the most immediate attention.

It might take more than advances in artificial intelligence to smooth the transition from Libor. The derivatives and cash markets have work ahead before they can confidently dispose of the ubiquitous Libor benchmark.

Download the full 2019 Libor transition and implementation special report in PDF format