Banks turn to AI as regulators press for Libor exit

Frequently described as the world's most important number because it underpins trillions of dollars of transactions, the London interbank offered rate (Libor) has persisted until now despite a scandal that caused lasting reputational damage to the entire financial system. Libor is the key interest rate benchmark for mortgages, loans and contracts but it has been tainted since 2012 when it emerged that banks had misstated their Libor rate submissions, often in collusion, to make better returns. The controversy led to at least five traders going to jail in the UK, and US and UK regulators extracting penalties totalling about $10bn. Regulators want Libor phased out by December 31 2021, and banks are pivoting to alternative risk-free rates such as Sonia (sterling overnight interbank average rate). Its demise is already a headache for law firms and banking clients, which must examine hundreds of thousands of legal contracts containing references to the Libor rate and then rewrite and "repaper" them to ensure they include the new reference rates.