The Financial Conduct Authority (FCA) boss Andrew Bailey yesterday said that the “pace of that transition is not yet fast enough”, when commenting on the pace of banks move from the Libor rate.

The transition is being implemented to benchmark trillions of pounds worth of contracts to avoid risking the stability of the global financial system, but Bailey further stated that there was “much further to go”. Firms will also need to demonstrate to the FCA that they have plans to “reduce dependencies” on Libor.

Currently regulators around the world are in the process of establishing new “risk-free” benchmark rates to replace the various versions of the London Interbank Offered Rate (Libor) across the world’s biggest currencies. Over the past decade, Libor’s reputation was severely damaged by the string of rate-fixing scandals.

The Financial Stability Board, which is Basel-based and chaired by Bank of England governor Mark Carney, yesterday said that transitioning away from Libor “will enhance financial stability”, during a statement urging firms to make the move to overnight risk-free rates, which are perceived to be more robust.

Bailey said that there has been “too much complacency” among firms that contracts will continue to be valid if Libor disappears.

US financial infrastructure firm Intercontinental Exchange has committed to continue to run the Libor rates, but Bailey warned that the end of Libor is not a “remote probability ‘black swan’ event” and that “misplaced confidence in Libor’s survival” could threaten financial stability.

Despite this, Ice Benchmark Administration president Timothy Bowler stood by Libor and said: “Ice Benchmark Administration fully supports the development of alternative risk-free interest rates and increasing choice to the market, but we also believe that a reformed Libor could continue to exist alongside these new rates, to serve a different set of customer requirements.”

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