Regulator sets out temporary version of the Libor benchmark

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Regulator sets out temporary version of the Libor benchmark

LONDON, 29 September Reuters - Britain's financial watchdog set out plans on Wednesday for the temporary publication of synthetic versions of Libor, the temporary interest rate benchmark which was scrapped largely at the end of December.

The London Interbank Offered Rate or Libor is being ditched after banks were fined in 2012 for trying to manipulate the rate for pricing morgages, loans and derivatives worth trillions of dollars across five currencies worldwide.

Most contracts using one of the 35 permutations of Libor are being converted to risk-free overnight rates for the Central Banks, such as Sofr from the U.S. Federal Reserve and Sonia at the Bank of England.

On Wednesday, the Financial Conduct Authority set out plans for a'synthetic' Libor version for a narrow range of outstanding sterling and yen contracts that cannot be switched in time, which risks creating disruption in markets.

The publication of a'synthetic' rate for some Japanese yen Libor and Sterling rates for a limited period will give market participants a bit more time to complete transition of legacy contracts, Edwin Schooling Latter, the FCA's director of markets and wholesale policy, said in a statement.

We encourage firms to also use this time well.