LONDON- Britain's Financial Conduct Authority (FCA) said on Thursday it wants banks to stop offering Libor-based interest rate swap contracts from the first quarter of next year.

The FCA has said the compilation of the tarnished Libor interest rate benchmark - used globally to benchmark contracts such as derivatives worth more than $300 trillion - is expected to cease at the end of 2021 and be replaced by Sonia, a rate compiled by the Bank of England.

"In sterling interest rate swap markets, we will be encouraging market-makers to make Sonia the market convention from Q1 2020," said Edwin Schooling Latter, the FCA's director of markets and wholesale policy.

Banks were fined billions of dollars for trying to rig Libor (the London Interbank Offered Rate) in its different currency denominations by massaging the quotes they submitted. Transactions used for central bank rates are seen as much harder to rig.

Schooling Latter said at this stage, that did not mean there would be no more sterling Libor swap transactions for those with a particular reason for preferring Libor over Sonia.

But it did mean making it standard to quote and offer swaps based on Sonia rather than Libor, he said.

"As infrastructure and liquidity to support Sonia swaps are already in place, this should be achievable with relatively little cost," Schooling Latter said in a speech in London.

The effective deadline ratchets up pressure on markets to migrate from Libor to new rates compiled by central banks including the Bank of England, the U.S. Federal Reserve and the European Central Bank.

The central banks' rates are based on actual market transactions rather than quotes that banks submit.

Regulators want markets to whittle away outstanding Libor contracts that go beyond the end of 2021, and avoid adding new contracts to the stockpile.

Schooling Latter said that referencing Sonia instead of Libor was "now the norm" in new issuance of floating rate sterling bonds and securitisations, with use of Libor in new mortgages now rare.

However, significant volumes of sterling-denominated new Libor swaps maturing after the end of 2021 are still being struck and Libor continues to be common in corporate lending, he said.

The FCA has told regulated firms they must nominate a senior official who is legally accountable for orderly transition from Libor.

Schooling Latter said it was no longer credible for a firm to claim it did not know Libor might not survive beyond the end of 2021, meaning they could face enforcement action if there is market disruption for customers.

(Reporting by Huw Jones; Editing by David Clarke and Susan Fenton) ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters Messaging: huw.jones.thomsonreuters.com@reuters.net))