Libor transition: special focus
Euromoney's latest coverage of the benchmark that serves as a reference rate for hundreds of trillions of dollars in financial instruments - and the upcoming transition to new risk-free rates (RFRs).
It was just what the regulators didn’t want: another surge in Sofr just as the timetable for transition away from US dollar Libor enters its critical phase.
September 10, 2019
It is less than two and a half years until Libor, the benchmark on which trillions of dollars-worth of financial instruments are based, will disappear. That is a hopelessly ambitious timetable in which to complete what has been called the largest financial engineering project in history. Even if chaos is averted, the way in which banks lend, and indeed how corporates borrow, may never be the same again.
In this story: Overnight interest rates • Libor alternatives • Sofr not so good • Impact on derivative and cash • Searching for a term solution • Credit-sensitive benchmark • Too late to wait? • A legislative solution
September 10, 2019
Banks are caught in the middle of regulatory pressure from above and corporate inertia from below when it comes to transitioning away from Libor, but they are the lynchpin on which the whole process depends.
The regulators want overnight rates to become the norm in all markets after Libor – that could be wishful thinking.
Cash borrowers want forward-looking reference rates to transition to after Libor and the market is struggling to come up with them.
Benchmark reform may have received a lukewarm welcome from corporates, but treasurers would be well advised to quantify their Libor exposures to avoid nasty surprises during the transition to alternative overnight risk-free rates.
It is one thing to develop alternative benchmarks to Libor, but, even as the clock is ticking, it is quite another to get issuers to use them.
Euribor’s administrator is confident that its reforms to the benchmark will make it eligible to be published and used after the Benchmark Regulation’s transition period ends. But don’t bank on it.
Worries are growing that benchmark rate replacements will take longer to create than the time available.
Progress has been made on possible replacements for Libor as a reference rate for financial instruments. But they don’t all have the market thrilling to the prospect of a Libor-less world.
August, typically a slow month for capital markets, was a fruitful one for alternative reference rates (ARRs) to Libor.
There’s a rush to find an alternative to ‘ibors’, but with just three years to go before banks might stop submitting Libor altogether, regulators and market participants are still trying to figure out the right questions to ask.
Jes Staley gets to stay in his job, but his difficulties don't end with one investigation.
December 21, 2017
The Association of Corporate Treasurers (ACT) has heralded a decision to include one of its members in a working group looking at the replacement for Libor.
The UK regulator thinks that bond markets could step up their approach to reporting market abuse.
The BBC is broadcasting tonight an episode of Panorama that will present new material relating to the Barclays Libor affair: here is a guide to some of the related evidence from the UK Treasury Select Committee inquiry in 2012.
The story of convicted Trader A – Tom Hayes – lays bare the actions of a few cliques that masterminded the headline-grabbing Libor scandal, but despite Hayes’ conviction it is still notoriously difficult to pin blame on individual traders even if a firm admits wrongdoing.
Defending Lord Libor – Icap's Colin Goodman
There has been widespread condemnation of the manipulation of Libor settings by employees of interdealer broker Icap, and rightly so. But the time has surely come for defenders of former Icap employee Colin Goodman, aka Cash Broker A, aka Lord Libor, aka Lord Bailiff, to step forward.
No conflict of interest with derivatives business, says CEO; rate must be anchored to market data.
The global race for alternative benchmarks to the much-maligned Libor is intensifying but much more work on due diligence and counterparty risk needs to be conducted.
Bank analysts warm to impact of RBS’s Libor fine
Bank analysts have come out broadly positive on Royal Bank of Scotland’s agreement with UK and US financial regulators to pay a combined fine of £390 million to settle charges its investment banking arm manipulated Libor.
Honourable Hourican leaves RBS with head held high
RBS’s investment banking head John Hourican is the fall-guy for the bank’s Libor-rigging fine, but he should be lauded for the job he has done in the most difficult circumstances.
By cutting back its investment bank sharply, UBS chief executive Sergio Ermotti has laid down a challenge to competitors and enthused shareholders who bid the stock up even after big Libor-related fines led to a hefty fourth-quarter loss. Details of the restructuring still remain sketchy, but it now seems that the private bankers wielding power at the top of UBS want to keep fair chunks of the investment bank. Has Ermotti found the keys to a resurgent UBS?
Tim Strong, a partner in the financial disputes team at international law firm Taylor Wessing, says new proposals from the Treasury at cracking down on Libor misconduct could be far-reaching for the banking sector - and will introduce tougher sanctions on the UK than the rest of Europe.
No bonus? Try whistle-blowing instead
The award of $104 million to UBS tax whistle-blower Bradley Birkenfeld in September showed that there is still good money to be made in banking. It just may come in the future from turning in your former colleagues and bosses to the authorities.
Plea bargaining hits banks with a backhander
The business of selling out your employer for a cash reward is still in its infancy. But the slow grinding of the wheels of regulatory justice is throwing up increasing numbers of employees who are providing evidence against employers to dodge or mitigate punishment.
Scandals: Banks’ operational risk rockets to new high
Operational risk more expensive than credit risk; Rearguard action hobbling future growth
Libor scandal: Counting the cost of the fix
Estimates of the impact of the Libor scandal have so far focused on potential direct costs in the form of fines and litigation expenses, tied to speculation about which investment bankers will be forced to follow Bob Diamond and Jerry del Missier of Barclays into unscheduled retirement.
Scandal to test client loyalty; Reputational and counterparty risks acute
The recent publication of email exchanges from 2008 between the Bank of England and the British Bankers’ Association about Libor reform cast both in a poor light.
It was Diamond’s hubris that ultimately triggered his untimely demise as Barclays' CEO, tarnishing a uniquely successful 16-year career as the architect of a global investment banking franchise. But his successor inherits a banking diamond that needs an awful lot of polishing.
Why did Barclays choose to settle first with respect to the Libor manipulation saga, given this week's damage to its franchise, and the departure of Bob Diamond? And just how large was its interest-rate derivatives exposures?
Bob Diamond is banking that the Libor manipulation scandal will trigger industry-wide litigation to even out the pain. Interview with Minos Zombanakis, Chairman, Group for International Study & Evaluation