Bloomberg estimates the exposure of all financial instruments using LIBOR as a benchmark reference rate of 200 200 trillion in the United States and 350 350 trillion worldwide.D
Why is Liber leaving?
Due to the reduction in the amount of short-term interbank banking, LIBOR is increasingly based on the expert opinion of a panel of banks rather than actual transactions. The UK Financial Conduct Authority, the supervisory body that regulates LIBOR since 2013, has reached an agreement to ensure that the panel will only continue to submit daily estimated orrow rates until December 2021, explaining why LIBOR is being closed.
Various reference rates are being considered worldwide for LIBOR replacement, but its successor in the United States is the Secure Overnight Financing Rate, or SOFR. The interest rate, published daily from the Federal Reserve Bank of New York, provides for overnight financing for banks that sell US Treasury based on transactions in the Treasury repurchase agreement and repurchase of them the next day for a fixed interest rate.
Vanguard’s preparation for LIBOR conversion
Since some vanguard funds are in contact with LIBOR, we have established a governance program and developed a plan to help us navigate a transition away from that standard. These include LIBOR transition plans for our investment products, remedial measures that demonstrate or use LIBOR calculations, modify online and print content, and seek solutions to recover existing legacy agreements to include provisions for LIBOR transitions and fallback languages.
Rely on Vanguard
We will continue to work towards a transition away from LIBOR while monitoring market developments and taking steps to ensure it is as smooth as possible. In doing so we will remain focused, as always, to give our investors the best chance of investment success.
DData until August 2019.
All investments are at risk, including the potential loss of money you invest.