British watchdogs cancel call for flexibility on March Libor stage

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LONDON (Reuters) – A Bank of England-backed industry group has resisted a lobby call for the lending market to be flexible on a “significant” but long-reported step for the removal of the interest rate from Libor reference.

FILE PHOTO: The Bank of England and the City of London Financial District in London, Britain November 5, 2020. REUTERS / John Sibley

UK regulators have already set a deadline at the end of March so that no new loans maturing after December 31 are valued using the London Interbank Offered Rate or Libor, with the tarnished interest rate being removed at the end of the year.

Replacing Libor after banks were fined billions of dollars for trying to rig the benchmark has proven to be one of the biggest challenges financial markets have faced in decades.

While progress has been good in the derivatives area, lending has lagged somewhat as companies cope with this task.

The Loan Market Association asked the BoE-backed industry group in January whether the end-March milestone “should be made more flexible” so that “funds continue to flow into the real economy,” the minutes showed. the meeting released Wednesday by the BoE. .

Members of the Loan Market Association include commercial and investment banks, institutional investors, law firms, service providers and rating agencies.

The chairman of the Bank of England-backed group, Barclays CFO Tushar Morzaria, expressed “reluctance to release such an important step,” according to the minutes.

Edwin Schooling Latter, a senior official with the UK’s Financial Conduct Authority, said there was a “clear expectation” that lenders should be able to offer loans at a price on Sonia’s overnight rate. “Large-scale” BoE from the end of March. Sonia is the rate that replaces Libor in Great Britain.

The group should “try to provide solutions to all market difficulties, rather than releasing a long-standing milestone,” Loan Facilitator Task Force chair Jamieson Thrower said.

The BoE’s Alastair Hughes said the lending market should not be driven by the progress of slower companies and that supervisors would take a “keen interest” on any sterling libor loans remaining after the end of March. .

Reporting by Huw Jones. Edited by Jane Merriman

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