In a statement before the CFTC Roundtable on Financial Market Benchmarks, CFTC Chairman Gary Gensler asserted the importance of moving to a more robust framework for financial market benchmarks, especially those for short-term variable interest rates. Chairman Gensler further stated that LIBOR has been “readily and pervasively rigged,” and thus may no longer be grounded in real transactions. As to the future of LIBOR, he questioned whether the published rates had any meaning, given what he said was the very limited volume of unsecured interbank financing. Chairman Gensler also discussed the need for procedures for transitioning from those benchmarks that have become unreliable or obsolete.
Lofchie Comment: As we have previously cautioned, firms should be developing backup plans to change the base rates of interest used in their documents, or should at least establish a procedure by which the base rates may be changed if existing benchmarks cease to be published.