The logo of Swiss bank Credit Suisse is seen at a branch office in Bern, Switzerland, on October 28 2020. Picture: REUTERS/ARND WIEGMANN
Attorneys not involved in the case say the chances of an injunction are slim. Yet it underscores the risks and legal costs for banks that continue to prop up Libor, which still underpins hundreds of trillions of dollars of financial assets worldwide. It also highlights the fragility of the discredited benchmark, which in theory could be halted by a single court decision.
Libor is derived from a daily survey of bankers who estimate how much they would charge each other to borrow. It’s used to help determine the cost of borrowing worldwide, from student loans and mortgages to interest-rate swaps and collateralised loan obligations. If the benchmark were to be immediately switched off, many derivatives contracts already contain contractual fallback language that would enable them to transition to an alternative rate, according to Y Daphne Coelho-Adam, a counsel at Seward & Kissel who is not involved in the case. But hundreds of billions of dollars of bonds, loans and securitizations lack a clear replacement rate and could pose a threat to financial stability.
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