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LIBOR: The drama is still to come

Author

Listed:
  • Datoo, Akber

    (Founder and CEO and Managing Director, D2 Legal Technology, UK)

Abstract

This paper first summarises the origin of the London interbank offered rate (LIBOR) and its methodology. Secondly, the impact of the financial crisis is explored as it revealed LIBORs flaws, leading to the LIBOR manipulation scandal which caused the market to question the reliability of LIBORs. Thirdly, the responses to the failures of LIBOR are considered, highlighting the complexity of LIBORs and their position in the market, as revealed by the conflicting views on how to remedy the reference rate’s flaws. Lastly, the consequences of the discontinuation of LIBOR are analysed, with a particular focus on the new risk-free rates, the vast amount of documentation referencing LIBOR and how ‘quick-fixes’ will do little alleviate the mounting workload and possible litigation risk faced by firms; concluding that the effects of LIBORs discontinuation will be felt well beyond the LIBOR cut-off date.

Suggested Citation

  • Datoo, Akber, 2020. "LIBOR: The drama is still to come," Journal of Securities Operations & Custody, Henry Stewart Publications, vol. 12(3), pages 255-265, June.
    • Handle: RePEc:aza:jsoc00:y:2020:v:12:i:3:p:255-265
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    Citations

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    Cited by:

    1. Robert Brooks & Brandon N. Cline & Pavel Teterin & Yu You, 2022. "The information in global interest rate futures contracts," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(6), pages 1135-1166, June.

    More about this item

    Keywords

    LIBOR; IBOR; FCA; benchmarks; fallback; interest rates; legal; repapering; contract; amendment;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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