Libor will continue with investment banks' backing until it is phased out in 2021, the Financial Conduct Authority announced today.
Today, the FCA said it had been working with banks to finalise an agreement for them to remain on the panels they currently submit to until 2021 in order to ensure a more orderly transition.
It said all 20 banks had pledged to stay on board until the end of 2021, by which point a market-based alternative is expected to replace the London interbank offered rate (Libor).
In a statement, the FCA said:
Based on this support until the end of 2021, the FCA expects focus to turn towards developing alternative rates and working towards a transition that can be executed smoothly.
Societe Generale will step down from the dollar Libor panel, while Credit Agricole will stop submissions to the yen panel. The FCA said it did not anticipate any further changes to the panels.
Andrew Bailey, chief executive of the UK's financial watchdog, said in a speech earlier this year that "the absence of active underlying markets" meant the future sustainability of Libor could not be guaranteed.
He said from 2021, it will no longer receive the backing of regulators as the industry tries to move to a more reliable marker.
Libor determines the rate charged to banks for borrowing from each other, but was embroiled in a significant rigging scandal.
The reformed Sonia, the Sterling Overnight Index Average, will see the central bank take on the end-to-end administration of the inter-bank lending rate, including the calculation and publication.
It came after a group of banks including Goldman Sachs, Barclays and Deutsche Bank, agreed earlier this year that Sonia would be the best alternative for Libor in sterling derivatives and other financial contracts.