FCA Chief Executive Says Libor Is Unsustainable

In a speech at Bloomberg London, UK Financial Conduct Authority ("FCA") Chief Executive Andrew Bailey discussed (i) the sustainability of the London Interbank Offered Rate ("LIBOR"), (ii) a target date for the cessation of FCA support for LIBOR, and (iii) planning for an orderly transition.

According to Mr. Bailey, the FCA concluded that it is "not only potentially unsustainable, but also undesirable, for market participants to rely indefinitely on reference rates that do not have active underlying markets to support them." Despite efforts to improve governance and anchor LIBOR submissions to actual transactions, he noted, the inactivity of markets that LIBOR seeks to measure has made it difficult to maintain a rate that accurately represents market conditions. Because of this, he said, even a well-run benchmark is unable to measure a "market [that] does not exist."