Evolving financial benchmarks: The impact on legacy contracts

Following scandals surrounding alleged manipulation of the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR), the attention of market participants and regulators alike has turned to the question of whether financial benchmarks and the regulatory regime that governs them are still fit for purpose. This paper summarises key regulatory developments designed to address the perceived weaknesses of European benchmarks and considers the future of such benchmarks as reference rates in standard form contracts. It asks whether the current regulatory reform programme can accommodate the demands of its objectives, on the one hand, and the necessity of guaranteeing contractual continuity on the other. The paper concludes that, despite significant risks, there are reasons to believe the reform programme will successfully address the existing shortcomings without major disruption to existing contracts.