LIBOR: The drama is still to come

Akber Datoo
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Akber Datoo: Founder and CEO and Managing Director, D2 Legal Technology, UK

Journal of Securities Operations & Custody, 2020, vol. 12, issue 3, 255-265

Abstract: This paper first summarises the origin of the London interbank offered rate (LIBOR) and its methodology. Secondly, the impact of the financial crisis is explored as it revealed LIBORs flaws, leading to the LIBOR manipulation scandal which caused the market to question the reliability of LIBORs. Thirdly, the responses to the failures of LIBOR are considered, highlighting the complexity of LIBORs and their position in the market, as revealed by the conflicting views on how to remedy the reference rate’s flaws. Lastly, the consequences of the discontinuation of LIBOR are analysed, with a particular focus on the new risk-free rates, the vast amount of documentation referencing LIBOR and how ‘quick-fixes’ will do little alleviate the mounting workload and possible litigation risk faced by firms; concluding that the effects of LIBORs discontinuation will be felt well beyond the LIBOR cut-off date.

Keywords: LIBOR; IBOR; FCA; benchmarks; fallback; interest rates; legal; repapering; contract; amendment (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aza:jsoc00:y:2020:v:12:i:3:p:255-265

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