FCA official: stick with overnight rates for all new contracts

Schooling Latter limits term rates to legacy contracts and wants backward-looking method for loans

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The UK’s Financial Conduct Authority has urged banks to use backward-looking versions of overnight rates in all new contracts referencing risk-free rates (RFRs), rather than relying on the build-out of new forward-looking term rates to replace Libor.

While derivatives markets are already coalescing around compounded-in-arrears versions of Libor successor rates, Edwin Schooling Latter, the FCA’s director of markets and wholesale policy, has stepped up the call for newly issued cash instruments,

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