Corporates need a stable and reliable interest rate benchmark for not only business and financial contracts but also to forecast, manage and account for many business activities. As it currently stands LIBOR is the world’s most widely used interest rate benchmark and continuity of contracts that reference LIBOR is fundamental for corporates.
We acknowledge the recent announcement by the FCA that they will continue to support LIBOR until the end of 2021 after which time they will not use their powers to persuade panel banks to submit daily rates. The continuation of LIBOR and/or suitable alternative benchmarks is still being discussed. The comments we make below are applicable for the period that the banks voluntarily continue to submit their rates to LIBOR. Specific comment regarding the importance of different LIBOR tenors and “forward looking” rates have been highlighted in our response to Q2 (part A and B).