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UPDATE 1-Central bankers say now is the time to get ready for end of Libor

(Adds details, background)

LONDON, July 13 (Reuters) - Top central bankers in the United States and Britain said the end-2021 deadline for dropping the Libor benchmark interest rate would not be extended because of the COVID crisis and lenders and borrowers had to have their transition plans in place now.

Bank of England Governor Andrew Bailey acknowledged there had been calls since the coronavirus pandemic escalated to step back from the shift away from Libor which is used to price trillions of dollars of financial contracts.

“But in my view, what we saw in financial markets in March in response to the shock of Covid only reinforces the importance of removing the financial system’s dependence on Libor in a timely way,” he said on Monday.

Bailey was speaking in an online discussion alongside John Williams, the head of the Federal Reserve Bank of New York, who also said the COVID crisis would not lead to an extension of the 2021 deadline.

“It doesn’t matter whether you’re a large global bank or a local company with a handful of employees, you need to be prepared to manage your institution’s transition away from LIBOR,” Williams said. “As I’ve said before, let’s not make the existing hole we’re trying to climb out of even deeper.”

During the financial crisis of 2007-09, some traders manipulated the rate, leading to criminal convictions and huge fines for international banks.

Last week, the Financial Stability Board, a global body for regulators, warned of a “significant negative impact” if authorities do not prepare for the end of Libor because many existing contracts are due to mature after 2021.

Bailey said anyone borrowing past the end of 2021 had to consider the greater certainty offered by alternative benchmarks and anyone continuing to use Libor had to consider how the contract would change before the end of next year.

“We would not expect to see any further sterling Libor linked lending after the end of March 2021,” he said.

Britain’s Financial Conduct Authority in April extended the cut off date for ending the use of Libor for new loans until the end of March next year due to the coronavirus pandemic.

Any solution for existing “legacy” contracts would not be available for new business, Bailey said.

Reporting by William Schomberg in London and Jonnelle Marte in New York; Editing by Chizu Nomiyama

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