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Vedanta featured once again in Thomson Reuters – FCA’s new benchmark powers and transition conduct

Thomson Reuters: The UK Financial Conduct Authority’s (FCA) new benchmark powers should push banks to put more effort into transitioning customers off the London Interbank Offered Rate (Libor) by the year end, consultants said. Libor transition planning and offering quality varies from bank to bank, and consultants have observed new transition-related conduct they fear might disadvantage customers.

Abhishek Sachdev, CEO of Vedanta Hedging, and Paco Carballo, Head of Derivatives Accounting at Vedanta Hedging speak with Thomson Reuters about the varied transition approach taken by banks, zero percent floors and legacy contracts.

Any additional powers the FCA gets to help cajole banks away from Libor and to move along the process faster, and in a fairer, cheaper way for customers, the better. To be fair, the FCA is one of the bodies who’ve been keeping their foot on the neck of these bankers, which has even got us to this stage in the transition

Banks have been saying for ages: ‘there’s no market for this, there’s no market for that’. We’re bored of this broken record. Banks can innovate and spend money when they want to

If a transition is not agreed on a facilities contract, then at the 31 December the fall backs are going to kick in and none of the fall backs we’re seeing is able to cope with using Sterling Overnight Index Average (Sonia) or BoE’s Base Rate. Most of them reference the banks’ cost of funds which is opaque and even by the banks own admision, “very difficult to calculate”. In our experience banks are, as much as they can, moving away from potentially having to use their cost of funds, because they know it’s going to be controversial and
challenged by their clients

Please see below for the full article by Thomson Reuters:

Libor FCA consult May 21