MNI BRIEF: BOE Hauser Warns LIBOR Contracts Will Be 'Lethal'

Bank of England Executive Director for Markets Andrew Hauser has urged firms to ensure that they move away from LIBOR based contracts, warning they could be 'lethal' by the end of 2021.

The Financial Conduct Authority only has an agreement with banks for the latter to keep providing LIBOR, interbank offered rates, through to the end of 2021 and the BOE has repeatedly stressed that as LIBOR volumes shrink the rate risks becoming ever more unrepresentative of borrowing costs.

"From 2022, therefore, the availability of LIBOR cannot be guaranteed. Something that is unsafe today will become lethal at the end of next year," Hauser said.

He noted that in March, LIBOR rates rose rather than fell in the wake of BOE and Federal Reserve rate cuts warning that it cannot be relied on to be in borrowers interest at times of stress. The BOE has championed the development of the alternative SONIA rate as an interest rate benchmark.