Speech Summary Interest Rate Benchmarks

The remarks provide an overview of a recent announcement by the UK Financial Conduct Authority (FCA) in relation to the future of London Inter-Bank Offered Rate (LIBOR) and its implications for Australian financial markets and the bank bill swap rate (BBSW). It also discusses the importance of ‘risk-free’ interest rates as an alternative to credit-based benchmarks such as BBSW and LIBOR. On LIBOR, the remarks note there is no guarantee LIBOR will continue to exist beyond 2021. While there is enough time to find an alternative, it is suggested that finding a replacement could prove difficult. The speech goes on to detail the progress of policymakers' efforts to make BBSW more robust, before touching on the relevance of BBSW for certain financial products and encouraging banks to develop other risk-free benchmark rates as soon as possible. The speech concludes that while change entails cost, doing nothing could be far more damaging financially.

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