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WASHINGTON – The Federal Reserve should consider launching an average financing rate in addition to replacing the interbank rate offered in London, scandalized by the scandal, Fed Vice Chairman
Randal Quarles
An average financing rate would boost trade and liquidity in replacing the Fed's chosen Libor and the banking sector with the guaranteed overnight rate, Quarles said, addressing The Alternative Reference Rate. Committee, a group of banks and regulators.
Increasing the replacement rate of the Libor is an urgent priority for regulators and market players, while the Libor is about to disappear. Mr Quarles revealed that the Fed's data shows the shortage of transactions that refer to Libor every day, and that banks are "rightly uncomfortable" with the collapse of the markets under of the Libor
. the rate was progressing "ahead of schedule", and that, despite the fact that futures on SOFR have only been trading for a few months, "there are already more underlying transactions than Libor."
in question after a rigging scandal where traders from many banks were able to push it up or down by submitting false data. The banks were fined billions of dollars and several traders were sent to prison. Since 2012, the Libor is under the supervision of US regulators.
Write to Gabriel T. Rubin at [email protected]
