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(Adds banking sector reaction)
By Huw Jones
LONDON, June 23 (Reuters) - Britain said on Tuesday it will
give regulators more powers to ensure that the Libor interest
rate benchmark is scrapped in an orderly way and on time by the
end of 2021.
The London Interbank Offered Rate is used to price contracts
worth around $400 trillion globally but regulators want to end
its use after banks were fined billions of dollars for trying to
manipulate the rate.
Derivatives and some loans have already begun switching from
Libor to being based on an overnight Sonia rate set by the Bank
of England for sterling denominated contracts.
It will not be possible to amend every contract by the end
of 2021 and the legislation will give the Financial Conduct
Authority (FCA) extra powers to protect users still holding
contracts using Libor after the deadline.
"The government recognises ... that legislative steps could
help deal with this narrow pool of 'tough legacy' contracts that
cannot transition from Libor," Britain's finance minister Rishi
Sunak said in a statement.
The FCA and Bank of England have dismissed talk that market
disruption caused by the COVID-19 pandemic will mean a pushback
to the end-2021 deadline, though some milestones have been
delayed.
Banking industry body UK Finance said the new powers will
also help ensure a smoother, quicker and more efficient
transition for contracts that can be changed.
The Bank of England and the FCA said the legislation should
not be seen as an excuse by market participants to slow efforts
to ditch Libor.
"The FCA will publish statements of policy on its approach
to potential use of these powers following further engagement
with stakeholders in the UK and internationally," the FCA said
in a statement.
The Association of Corporate Treasurers said it takes some
of the pressure off a particular "corner" of the market that was
distracting attention from the more general transition away from
Libor.
(Reporting by Huw Jones; Editing by Andy Bruce, Alison Williams
and Alexandra Hudson)
