A rate being dubbed “synthetic Libor”, which would be calculated as a spread over an overnight risk-free rate, is one of the approaches being discussed as a possible mitigant to the legacy Libor issue by the “tough legacy” subcommittee of the sterling risk-free rate working group. The synthetic Libor would allow Libor to live on, if only in name, past its 2021 transition date. Still, Rich Fox, the head of markets policy at the UK’s Financial Conduct Authority and chair of the subcommittee, says the market should still prepare for the rate to end at some point. “All of the avenues people tell us to explore are difficult to deliver. They all have drawbacks even if they can be delivered. Ultimately from my point of view, you come back to cessation,” said Fox. All possibilities are being entertained for those contracts that are inextricably Libor-linked, though nothing has been decided yet.
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