Replacing Libor Benchmark Could Cause Chaos and Confusion - Bloomberg

Replacing Libor Benchmark Could Cause Chaos and Confusion - Bloomberg



...Where government (central bank to central bank) rates become the market benchmark, banks may increase lending rates to compensate for the uncertainty of their actual funding costs.





...Unlike Libor, which fixes the rate for periods such as one, three or six months, some proposed benchmarks are overnight rates. The lack of term structure creates uncertainty in the cost of funding for borrowers.



...The new benchmarks, especially where the reference rate used in a loan or investment differs from that underlying the derivative, ... forcing mark-to-market gains to be recognized as current-year gains or losses, creating earnings unpredictability that may discourage risk management.