LIBOR Update

LIBOR has been a key interest rate benchmark for many decades, used as the principal reference rate to several hundred trillions of dollars in derivatives, bonds, loans and securitizations. However, when the LIBOR manipulation scandal unraveled itself in 2012, widespread problems with regard to the reliability of LIBOR were identified.

As a result of this, the global regulatory community introduced reform efforts with the aim to help rebuild the public's trust in the reliability and robustness of reference rates, including LIBOR. Since then, the Financial Conduct Authority had announced that after 2021 it will no longer compel participating banks to submit their LIBOR data. What this largely means is that from the end of this year LIBOR may disappear and floating rate loans that currently reference LIBOR would be expected to transition to a floating rate based on so-called “risk-free reference rates” (or RFRs). In the case of Sterling-denominated commercial loans,