LIBOR was introduced in 1969, when one of the first syndicated loans of USD 80 million was pegged to LIBOR (Source: Reuters, August 2012). Over the decades, LIBOR and other Interbank Offered Rates (IBORs) served as an efficient and effective set of benchmark interest rates, reflecting the interest rate on unsecured interbank borrowings of designated panel banks. Globally, more than USD 400 trillion notional in derivatives, loans and other financial products are based on IBORs (Source: BIS Quarterly Review, March 2019). IBORs are also hardwired into many financial processes, including valuations and risk management.
Following the financial crisis, the numbers of transactions on the interbank market significantly decreased. This raised questions about the sustainability of the LIBOR framework.
Ultimately, in 2017, the UK's Financial Conduct Authority announced it would not compel panel banks to continue to provide LIBOR submissions beyond the end of 2021. Thereafter, discussions around the transition of LIBOR rapidly advanced and market participants started preparing for the transition to alternative methods, which aim to support a sound and resilient financial market.