LONDON, July 12 (Reuters) - Banks must press on with using new "risk free" interest rate benchmarks instead of Libor in financial contracts, Britain's markets watchdog said on Thursday.
Banks have been fined $9 billion for trying to rig Libor, a measure of the borrowing costs among banks, and the Bank of England has launched an alternative, its SONIA overnight rate for use in contracts.
But switching contracts to SONIA is difficult in some cases as Libor can stretch out several years rather than just overnight.
"The absence of ways to remedy the current underlying weakness in Libor – the lack of transactions, the unattractive prospect of Libor limping on with fewer panel banks, and the significant problems associated with a synthetic LIBOR, all lead to the same conclusion," Financial Conduct Authority Chief Executive Andrew Bailey said.
"The best option is actively to transition to alternative benchmarks. The most effective way to avoid Libor-related risk is not to write Libor-referencing business," Bailey said in a speech at Bloomberg in London.
The Bank of England's said this month that "market participants continued to accumulate Libor-linked sterling derivatives for periods well after 2021". (Reporting by Huw Jones; editing by Jason Neely)