LIBOR risks growing


Philip Whitehurst, head of service development at clearing house LCH has warned delegates at the Fixed Income Leaders Summit to take FCA warnings seriously regarding the end of Libor as a benchmark in 2021 deadline.

He referred to chief executive Andrew Bailey’s July speech that firms ‘must be able to run their business without LIBOR by end of 2021’ or risk serious consequences.

He said: “The regulator has helped the private sector understand the significance and the severity of the risks that are based on vulnerable IBORs. They have galvanised activity.”
He also noted that although some of the buy side felt that their ‘hair had been set on fire’ after Bailey’s speech, there must be ‘periodic moments where the importance of the issue is stressed’.

Ross Barrett, senior policy adviser at The Investment Association, said the FCA had devoted attention to the sell side, but said that if the buy side did not start moving away from Libor, oversight would increase.

“There are concerns about whether [the buy side] will get there, but the regulator can get tougher. If the dial doesn’t turn towards people switching over to [other rates] then the FCA will get a lot tougher,” Barrett said.

However, he said that since there is no single agreed rate nor any clear guidance from financial regulators around the world about how best to proceed, the transitions were hard to execute.

Pieter van Vredenburch, principal at Market Alpha, agreed adding that in some cases all parties in a trade would need to agree on alternate to Libor, and called on regulators to provide more guidance.

“The regulators have to get a list together of what they need to do otherwise they are opening it all up for an amount of litigation that will be off the chart,” he said.

©The DESK 2019