US regulator urges firms to end use of Libor benchmark, Latest Business News - The New Paper

US regulator urges firms to end use of Libor benchmark

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WASHINGTON: The US market regulator on Friday added its voice to the chorus of global watchdogs calling for banks to promptly end their use of the Libor lending benchmark, warning that the industry was running out of time ahead of a 2021 deadline.

The Securities and Exchange Commission (SEC) wants to see banks begin the process of assessing their existing contracts' exposure to the London interbank offered rate, or Libor, and to ensure all new contracts move to an alternative benchmark reference rate, most notably the secured overnight financing rate.

Globally, Libor is used to price contracts worth US$300 trillion (S$407 trillion).

The SEC wrote: "The risks associated with this discontinuation and transition will be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner."

Libor's reputation as the market standard has been tainted in the wake of rigging scandals by traders, which resulted in billions of dollars in fines for major global bank.

The British regulators have set a 2021 deadline for financial companies, including banks and investors, to transition away from the benchmark. - REUTERS