out Australian dollar rates from the London Interbank Offered
Rate (Libor) is the right decision, according to local
benchmark rate the bank bill swap reference rate (BBSW)
is the dominant reference in the countrys
Australian dollar is one of five base currencies being
discontinued from Libor calculations, following the
Wheatley Libor Reviews final report recommendations
announced on Friday.
unsurprised the Wheatley report has recommended that A$ Libor
no longer be reported, said Sydney-based Baker &
McKenzie partner Bryan Paisley.
the wake of this years rate-rigging allegations, Wheatley
has recommended Libor calculations be based on actual trades
rather than banks estimates. The BBSW
is based on actual trades and
has survived the global
crackdown on benchmark rates unscathed.
method requires sufficient liquidity for a rate to be accurate.
Of the 150 Libor rates published daily (under the existing
regime) only 20 satisfy this test, meaning 130 of the Libor
rates will be scrapped.
was concern that stopping Libor calculations for certain
currencies could lead to market disruption under existing
contracts, and lack of a benchmark rate for future
is not the case for Australia.
is virtually unchallenged in the local market as a base rate
and the statistical data in the report confirms that the London
market doesn't use A$ Libor widely, Paisley
report notes that while the use of Libor among non-core
currencies is minimal, there will be some outstanding contracts
that will be impacted by discontinuing the rates. Therefore,
the 130 rates will be phased out over a 12-month transition
period to give market participants time to adapt to new
the least used rates, these may be phased out over six
what Libor can learn from Australias benchmark
Libor Review: what will it achieve? http://www.iflr.com/Article/3096046/Banking/Wheatleys-Libor-Review-what-will-it-achieve.html