Libor rate faces the axe

BANK of England governor Mark Carney has proposed scrapping the scandal-ridden Libor rate with hopes of replacing it with a relatively ‘risk free’ alternative.

Carney is gunning for the widespread adoption of the Sterling Overnight Index Average (Sonia) in hopes of weaning the system off Libor. Libor – the London Interbank Offered Rate – is the rate at which banks lend to each other, and is used to set millions of pounds worth of financial deals including car loans and mortgages.

But a spate of Libor-rigging scandals dating back to 2005 brought the benchmark into the public spotlight, resulting in fines for international banks and convictions for City traders.