For several years, the Financial Stability Board's (FSB's) Official Sector Steering Group (OSSG) has been monitoring progress on three work streams: 1. to strengthen the IBORs by anchoring them to a greater number of transactions, and improve benchmark governance 2. to identify robust alternative risk-free rates and encourage derivatives to be referenced to them instead of the IBORs 3. to ensure that contracts referencing IBORs include robust fall-back provisions to reduce the risk of financial instability if an IBOR were to be discontinued.
LIBOR is the key interest rate benchmark for several major currencies, including the US dollar and British pound. In July last year, Andrew Bailey, who heads the FCA, raised some serious questions about the sustainability of LIBOR. The key problem he identified is that there are not enough transactions in the short-term interbank funding market to reliably calculate the benchmark.