FCA Extends Timeline to Cease Issuance of LIBOR-Linked Loan Products
FCA published a statement from the Working Group on Sterling Risk-Free Reference Rates (RFRWG) on the impact of COVID-19 outbreak on the timeline for LIBOR transition plans of firms. As per the new timeline, all new issuance of sterling LIBOR-referencing loan products that expire after the end of 2021 should cease by the end of the first quarter of 2021. The statement also highlights that within sterling cash markets, transition to SONIA in the bond market has been largely completed. In loan markets, lenders will continue work to make SONIA-based products available before the end of the third quarter of 2020 and some borrowers will be ready to take advantage of these alternative products before then.
The RFRWG, FCA, and BoE recognize that it will not be feasible to complete transition away from LIBOR across all new sterling LIBOR-linked loans by the original target of the end-of-the-third quarter of 2020. There will likely be continued use of LIBOR-referencing loan products into the fourth quarter of 2020 in particular, to maintain the smooth flow of credit to the real economy. Taking this into consideration, the RFRWG recommends that:
- By the end of the third quarter of 2020, lenders should be in a position to offer non-LIBOR linked products to their customers.
- After the end of the third quarter of 2020, lenders, working with their borrowers, should include clear contractual arrangements in all new and re-financed LIBOR-referencing loan products to facilitate conversion ahead of the end of 2021, through pre-agreed conversion terms or an agreed process for renegotiation, to SONIA or other alternatives.
- All new issuance of sterling LIBOR-referencing loan products that expire after the end of 2021 should cease by the end of the first quarter of 2021.
Once plans and working arrangements disrupted by the COVID-19 outbreak begin to stabilize, the working group (RFRWG) and its members will intensify communication with customers needing to move away from LIBOR as part of transition.
Related Link: FCA Statement
Keywords: Europe, UK, Banking, Securities, LIBOR, COVID-19, SONIA, IBOR Reform, Benchmark Reform, Interest Rate Reform, BOE, FCA
Next Article
OJK Amends Regulation on Corporate GovernanceRelated Articles
ECB Amends Guideline on Temporary Collateral Easing Measures
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA Releases Report on Artificial Intelligence Governance Principles
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.
HKMA to Increase Focus on Suptech and Regtech Cloud Adoption
HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.
EC Consults on Improving Transparency in Secondary Markets for NPLs
EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).
BIS and Nordic Central Banks Launch Innovation Hub in Stockholm
BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.
FDIC Tech Sprint Aims to Explore Technologies to Reach Unbanked
FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.
EC Releases Sustainable Finance Taxonomy Compass
EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.
FDIC Proposes Amendments to Real Estate Lending Standards
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
EIOPA to Consider Liquidity Risk in Stress Test for 2021
EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.
ESRB Paper Discusses Measurement of Impact of Bank Failure via Lending
The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.
