By Andrew Ackerman and Dave Michaels 

WASHINGTON -- Top U.S. financial officials on Friday pressed banks to stop using the London interbank offered rate on new transactions by the end of 2021, warning that firms aren't moving swiftly enough to replace the benchmark for hundreds of trillions of dollars in financial contracts.

Treasury Secretary Janet Yellen and other top officials pressed the issue at a meeting of the Financial Stability Oversight Council, a group that monitors the stability of the financial system.

"We are at a key inflection point," Randal Quarles, the Fed's point person on financial regulation, said at the meeting. "The deniers and the laggards are engaging in magical thinking. Libor is over."

The exhortations amount to the strongest and clearest guidance yet from top policy makers about the risks to banks for writing new contracts based on Libor. The benchmark is scheduled for replacement at the end of 2021 in the wake of a manipulation scandal.

Rather than dwindling as regulators have urged, loans tied to Libor have grown to around $223 trillion this year compared with $199 trillion at the end of 2016, according to a March report from the Alternative Reference Rates Committee, a financial industry group made up of major banks, insurers and asset managers alongside the Federal Reserve Bank of New York.

The increase is one sign lenders have yet to fully embrace the Fed's preferred replacement: the Secured Overnight Financing Rate, or SOFR. While large banks and mortgage lenders like Fannie Mae have started actively using the benchmark, some large U.S. corporations and other borrowers held off, seeking a benchmark that could fix rates over longer time spans.

Write to Andrew Ackerman at andrew.ackerman@wsj.com and Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

June 11, 2021 16:18 ET (20:18 GMT)