UK watchdog warns banks over replacing Libor with credit sensitive rates

LONDON - Banks should consult first with the Financial Conduct Authority before using "credit sensitive rates" to substitute for the Libor benchmark which is being scrapped in December, the watchdog said on Monday.

"We ask that any regulated UK market participants looking to use these so-called 'credit sensitive' rates in UK-based business consider the risks carefully, and raise with their FCA supervisors before doing so," Edwin Schooling Latter, the FCA's director of markets and wholesale policy, told a UK Finance event on Monday.

Regulators in Britain want Libor, used as a reference price in financial contracts, replaced with the Bank of England's overnight Sonia rate.