THE BIG SHIFT: PREPARING FOR A WORLD WITHOUT LIBOR
LIBOR (London Inter Bank Offer Rate), the interest rate at which banks
lend money to one another for short term loans, is a globally accepted
benchmark rate used to develop and offer wide range of financial products.
Post considerable uncertainties in LIBOR supervision and administration,
UK’s FCA (Financial Conduct Authority) took the supervision from BBA
(British Bankers Association) and delegated the administration responsibility
to IBA (ICE Benchmark Administration).
The estimated size of the LIBOR linked products across the globe is $350
trillion. With FCA’s announcement stating that LIBOR will see its end by
2021, and suggesting all the LIBOR users to opt for other risk free rates, now
the biggest challenge in front of the financial institutions is to transition
from LIBOR to other risk free rates. The shift away from LIBOR is going to
have a far-reaching impact on stakeholders across the financial services