February 26, 2020 / 8:36 AM / a month ago

Bank of England tells lenders to accelerate moves to ditch Libor

LONDON, Feb 26 (Reuters) - The Bank of England told banks on Wednesday to accelerate their efforts to ditch the use of Libor if they want to avoid facing more punitive terms when borrowing from the central bank.

The BoE wants Libor, which banks were fined for trying to rig, replaced with the central bank’s overnight “risk-free” Sonia interest rate.

“We need to see another decisive acceleration in effort in 2020 to ensure risk-free rates are adopted across the full range of sterling business, and Libor is left behind for good,” Hauser told a derivatives industry conference.

Hauser said that from October, the Bank will start increasing “haircuts” progressively on Libor-linked collateral used by banks to borrow from the central bank, meaning more collateral would be needed to cover the same amount borrowed.

The BoE will also publish a “compounded” Sonia index from July.

Reporting by Huw Jones, editing by Carolyn Cohn

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