LONDON, Jan. 1 (Xinhua) — After a decades-long dominance in global financial markets, the London Inter-Bank Offered Rate, or LIBOR, an interest rate benchmark, is being phased out, a major step of which came Saturday when the publication of most LIBOR settings ended.
All sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month U.S. dollar settings ceased to be provided immediately after Dec. 31, 2021, and the remaining U.S. dollar settings will cease after June 30, 2023, according to a March 2021 announcement issued by the Financial Conduct Authority, a British financial regulatory body.
LIBOR, formalized in 1986 and with its origins going back to the 1960s, has historically been one of the main interest rate benchmarks used in financial markets, which determines interest rates for financial contracts around the world, said the Bank of England.
Based on submissions provided by a panel of banks, LIBOR was calculated for five currencies and for seven tenors in respect of each currency, resulting in the publication of 35 individual rates each applicable London business day before the end of 2021.
The role played by LIBOR had hardly been questioned until the 2008 global financial crisis. It was then found that the murky interest rates setting process for LIBOR was flawed and vulnerable to manipulation by a small group of firms, which crippled the credibility of the benchmark. Though regulators had tried to reform LIBOR, the attempts ended up in failure.