Goodbye LIBOR

October 04, 2024 (MLN): The London Interbank Offered Rate (LIBOR)'s long-running part in global finance has officially come to an end on September 30, 2024, with all 35 settings permanently ceasing publication.

This transition impacted around $400 trillion in financial contracts, representing a significant step towards enhancing the safety and stability of financial systems.

The shift away from LIBOR has been a comprehensive effort involving UK regulators, international counterparts, and market participants over the past decade.

The focus has been on moving to risk-free rates (RFRs), which are based on robust data and are designed to exclude counterparty credit risk, thereby providing a more reliable benchmark for financial transactions.

Notable examples of RFRs include the Secured Overnight Financing Rate (SOFR), administered by the Federal Reserve Bank of New York; the Sterling Overnight Index Average (SONIA), administered by the Bank of England; and the Tokyo Overnight Average Rate (TONA), administered by the Bank of Japan.

To facilitate the transition, synthetic LIBOR was introduced as a temporary solution, allowing firms additional time to convert outstanding legacy LIBOR-linked contracts to alternative RFRs and ensuring an orderly cessation.

The successful transition from LIBOR is the result of extensive collaboration among market participants, trade bodies, regulators, and other authorities worldwide.

This joint effort has paved the way for a more robust and resilient financial infrastructure, better suited to meet the needs of modern markets.

Earlier this year, the Economic Coordination Committee (ECC) of the Cabinet approved the transition from LIBOR to SOFR. 

This decision was announced in a press release issued by the Finance Division.

The transition reflects the government’s commitment to adopting more robust and reliable financial benchmarks, ensuring greater stability in the financial sector.

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