Banking giants agree to back Libor until 2021

TWENTY banking giants have agreed to support the scandal-hit London Interbank Offered Rate (Libor) benchmark until an alternative is found in 2021 so that the transition does not rattle markets.

The City watchdog warned earlier this year that markets would be disrupted if banks stopped submitting Libor before it is due to be phased out in four years time, the concern being that if some stopped others might follow.

“We could not, and cannot, countenance the market disruption that would be caused by an unexpected and unplanned disappearance of Libor,” said the Financial Conduct Authority’s chief executive, Andrew Bailey.

Those fears were alleviated yesterday, however, when the FCA confirmed that all 20 banks which submit quotes for Libor have promised to support the rate until an alternative is bought in. These include HSBC, Credit Suisse, JP Morgan and Lloyds.

Manipulation of Libor, used to price trillions of pounds of financial products including loans and mortgages, was uncovered in 2012 when traders and banks were accused of fixing the rate to their own benefit.

A number of convicted traders are now trying to clear their name, with The Daily Telegraph revealing last week that a letter was sent to the Justice Committee calling for an investigation into the Serious Fraud Office’s choice of an expert witness.

An appeal by Alex Pabon, one of the four Barclays’ bankers who was jailed last summer for attempting to manipulate the rate but who was released from prison earlier this year, was heard at the Court of Appeal yesterday. The scandal has forced change in the interest rate benchmark landscape.

The Bank of England said last month that it planned to beef up Libor rival the Sterling Overnight Index average (Sonia), from next April.