The use of four dollar-denominated alternatives to the now-scrapped Libor interest rate need restrictions to avoid threatening financial stability, a global securities watchdog said and Reuters reported. IOSCO, a global securities watchdog group that includes the U.S. Securities and Exchange Commission as a member, said a review has identified "varying degrees of vulnerability" in these four unnamed rates. The final dollar-denominated London Interbank Offered Rate or Libor was published last Friday. Once dubbed the most important number in the world, Libor has been withdrawn after banks were fined for trying to rig a rate referenced in credit cards, business loans and mortgages worth trillions of dollars globally. Libor has largely been replaced by rates compiled by central banks, such as the dollar-denominated Secured Overnight Funding Rate (SOFR) from the Federal Reserve. Several so-called credit sensitive rates (CSRs) and term SOFR rates are being offered as alternatives to SOFR, which has no forward 'terms' or credit component, though volume in them has been low. Regulators have previously warned that these alternatives could be vulnerable during periods of market stress, but the statement goes further in suggesting curbs. IOSCO said certain CSRs track bank commercial paper and certificates of deposit data which are not sufficiently deep, robust and reliable to underpin alternatives to Libor.
