STOCKHOLM (Reuters) - Using the London interbank offered rate (Libor) for financial contracts is increasing systemic risks and market participants must ditch it in favor of a new risk-free rate, the Federal Reserve Bank of New York's Matthew Lieber said on Friday.
Regulators have set a December 2021 deadline for effectively ending the use of Libor - which is used to price trillions of dollars-worth of contracts - after banks were fined billions of dollars for trying to rig the benchmark.
But Lieber, director of capital markets and institutions in the Fed's markets group, urged an accelerated switch to a new rate called the Secured Overnight Financing Rate (SOFR).
"We need to coordinate on a global basis," Lieber told a meeting of bond market professionals in Stockholm. "The most imperative challenge is just to stop using Libor, market participants need to stop using Libor contracts. Systemic risk is growing on each new contract written on Libor and would be reduced if they were entered into SOFR."