ICE Benchmark to consult on scrapping most Libor denominations

LONDON (Reuters) - Libor compiler ICE Benchmark Administration said on Wednesday it will consult on its plan to stop publishing the interest rate denominated in sterling, euro, Swiss franc and Japanese yen.

Britain’s Financial Conduct Authority and other regulators have said they want banks, companies and other market participants to end the use of the London Interbank Offered Rate or Libor by the end of 2021.

Scrapping Libor as a price reference in contracts like derivatives, mortgages and loans worth trillions of dollars globally is one of the biggest tasks faced by markets in decades.

ICE said it would consult on the four currency denominations of a benchmark that some global banks were fined billions of dollars for trying to rig.

“Discussions involving IBA, the Financial Conduct Authority, other official sector bodies and the panel banks are continuing regarding the future of dollar Libor,” it said in a statement.

Libor is largely being replaced by overnight rates compiled by central banks like the Federal Reserve, the Bank of England and the European Central Bank, but market participants say not all contracts like loans can be amended.

“IBA has engaged with end-users, panel banks, the FCA and other official sector bodies regarding the potential for continuing certain widely-used Libor settings after December 31, 2021, where necessary to support transition,” ICE said.

Libor is compiled by a panel of banks submitting quotes to ICE, which filters them as a safeguard against attempts at manipulation. The market, however, has largely dried up, meaning many of the Libor denominations published by ICE are based on “judgments” rather than actual transactions.

Separately on Wednesday, the FCA set out how it would use new powers to ensure an orderly wind down of Libor. The powers would allow it to order the continued publication of an amended form of Libor beyond December 2021 in certain circumstances.

It would not be applied where Libor is little used, where contracts can be amended without regulatory intervention, or where consumer protection and market integrity were not at risk, the FCA said.

The watchdog said it would not expect to order continued publication of euro or Swiss franc Libor, but sterling Libor would likely meet its conditions.

The FCA said it was still assessing whether it would use its powers to force continued publication of yen Libor, and would consider dollar Libor if IBA consults on ending its publication.

Reporting by Huw Jones, editing by Sinead Cruise and Nick Tattersall