report the 1 day, 1 week, as well as the 1, 2, 3, 6, and 12-month maturities (David Hou, 2014). Publishing submissions based on transactions is very important. During the Scandal, submissions from banks would occur on the same day. Given this reform and changing submission of publication from immediately to one months after, this heavily restricts various banks from distorting numbers for the benefit of their own. This provides a more accurately, consistent rate at which banks lend at, which will benchmark the rate more to its true value.
The Financial Conduct Authority (FCA) now overlooks the regulatory procedures of LIBOR, which their conduct is centred around Wheatley review: where falsifying submissions is now a criminal offence, and can result to heavy, harsh fines and prosecutions. This regulatory pressure aides the suppression of Banks, and acts as a deterrent for further manipulations. Now, Banks take precautionary measures when submitting data, given the harsh actions that would unfold if they didn’t comply. Recently, in 2016, The Chief Executive of The FCA concluded to bury LIBOR, due to producing far below average transactions of currency-tenor in year 2016.
The FCA are aiming to reform the LIBOR by phasing out LIBOR after 2021 – meaning Banks no longer need to conform to the submission of data by regulators. Following the financial crisis, banks have shifted away from unsecured short-term borrowing, preferring repos, bonds and other forms of financing (Paul Cantwell, 2018). So these factors coupled with LIBOR’s unsustainable structure in the money markets, and Banks willingness to maintain investor and consumer trust, will result more banks voluntarily retracting from LIBOR Submissions in the future. Although, I believe this process will be a success, it will prove to be a very difficult transition to completely phase out a widely used rate. There are still trillions of pounds worth of financial instruments that are pegged to LIBOR, and in some cases, still have maturities after 2021. LIBOR is still a floating rate for a huge sum of contracts, regardless of alternative risk-free rates.
Alternative risk-free rates have been proposed and soon to be implem