The London Interbank Offered Rate (LIBOR) has been the broader financial world's benchmark for setting short-term interest rates for products like variable-rate mortgages and corporate loans for the last 20 years. Libor is referenced for interest payments on about $400 trillion in notional value of derivative contracts.
Alexander Dzneladze, President of the Georgian Banking Association (BAG) declares that LIBOR will be phase out and introduction of new risk-free indicators is planned.
“Currently, there are credit agreements with variable interest rate throughout the country, which are tied to the LIBOR change. From 2022, when Libor will no longer exist, all credit institutions and securities markets will be free. Work is underway today to determine which rate will be the cut-off point”, Dzneladze notes.
According to Alexander Dzneladze, if the contract is changed, the interest rate still remains the same and it will just be a new, alternative indicator and not LIBOR.
The MarketsWiki reports, that on March 5, 2021, the U.K. Financial Conduct Authority (FCA) confirmed that LIBOR fixings would no longer be provided by administrators or be representative after December 31, 2021 for most rates -- sterling, euro, Swiss franc and Japanese yen settings, as well as for 1-week and 2-month U.S. dollar settings. The FCA gave an added deadline of June 30, 2023 for remaining U.S. dollar settings. In a related statement, Bank of England Governor Andrew Bailey said, "With limited time remaining, my message to firms is clear – act now and complete your transition by the end of 2021.
The Libor benchmark was set up by the British Bankers Association in 1986 as a way of pricing syndicated loans and interest-rate swaps.
