After decades of transition, the London Interbank Offered Rate (LIBOR) will cease to be published as of next week, The New York Times reported.

The LIBOR was the benchmark interest rate most widely used by financial institutions when making short-term loans to each other in the international market. It served as a globally accepted key benchmark interest rate that indicated how much it costs to the banks to borrow from each other. However, the rate became suspect during the 2007-2008 financial crisis, when it was found that, for years, currency brokers at major banks had been coordinating with each other over instant messaging to fix the rates in order to boost profits and obscure financial difficulties. The scandal rocked the LIBOR's previously sterling reputation as a reliable rate. In the wake of the scandal, the United Kingdom's Financial Conduct Authority, its chief financial regulator, said that the rate is no longer tenable and so would phase out its use by 2021. 

“LIBOR was a ubiquitous rate across all global financial products; it was the single most important benchmark in the world, and to move the market away from that has been a truly herculean effort,” Mark Cabana, the head of U.S. rates strategy at Bank of America, told The Times. “There are still issues, but it’s remarkable that LIBOR will go out with more of a whimper than a bang. That was unthinkable years ago.”

In the United States, LIBOR is being replaced by the Secured Overnight Financing Rate (SOFR), which the Federal Reserve and other regulators prefer banks and their borrowers use.

Still, many contracts written before, and even some after 2022, when new deals were not supposed to be linked to LIBOR, still cite the LIBOR benchmark.

“It’s been a gargantuan amount of work,” Meredith Coffey told the Times, speaking of the frantic efforts to meet the deadline. She has been part of the transition effort since 2017 as co-head of policy at the Loan Syndications and Trading Association. “When we started talking to people in cash markets telling them that LIBOR would cease, they thought we were crazy.”

A small percentage of companies do not have fallback languages, but analysts said that they could take advantage of a decision made this year by British regulators to publish a rate that mimics LIBOR through September 2024. Others may be forced to use what is called the prime rate, which reflects the cost for consumers to borrow from commercial banks.

“This has been a colossal change,” said Tal Reback, a director at the investment firm KKR and member of the industry committee managing the transition away from LIBOR. “It’s been a re-engineering of global financial markets that came alongside a global pandemic, extreme inflation and rising interest rates. There are going to be growing pains, but for all intents and purposes it’s time to say: ‘Rest in peace, LIBOR.’”