Pressure on banks and financial markets to ditch the tarnished Libor interest rate by the end of 2021 will increase next year as a global watchdog scrutinises progress in switching to new pricing benchmarks. Libor is used to price contracts worth around $400 trillion, ranging from home loans to credit cards and swaps that are used by companies and banks to shield themselves against unexpected moves in borrowing costs.

The Financial Stability Board (FSB) said on Wednesday it will survey national regulators, many of them FSB members, to measure their progress in persuading banks and companies to stop using the London Interbank Offered Rate or Libor.

The FSB wants markets to use overnight interest rates compiled by central banks like the Federal Reserve, Bank of England and the European Central Bank.

The overnight rates are based on verifiable market transactions unlike Libor, which is largely derived from quotes submitted by banks. "The continued reliance of global financial markets on Libor, therefore, poses risks to financial stability," the FSB said in its annual update on the Libor transition. The FSB called for a "significant and sustained" effort by the financial sector and regulators to meet the end 2021 deadline. "Firms need to end the use of Libor in new contracts as soon as possible," said the FSB, which coordinates financial rules for the Group of 20 Economies (G20). It will report to the G20 in July on remaining challenges to the Libor transition. "An issue of increased concern and attention on the part of authorities is the global exposure to US dollar Libor," the FSB said. Although there is no mandatory requirements for banks to ditch Libor.