FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition. As per the statement, the FSB Official Sector Steering Group (OSSG) recognizes that some aspects of the transition plans of firms are likely to be temporarily disrupted or delayed, while others can continue. LIBOR transition is a G20 priority and the G20, in its February 2020 communique, asked FSB to identify remaining challenges to benchmark transition by July 2020 and to explore ways to address them. FSB will publish a report on these issues later this month.
FSB is of the view that financial and non-financial sector firms across all jurisdictions should continue their efforts in making wider use of risk-free rates to reduce reliance on interbank offered rates (IBORs), where appropriate, and to remove the remaining dependencies on LIBOR by the end of 2021. LIBOR transition remains an essential task that will strengthen the global financial system. The COVID-19 crisis highlighted that the underlying markets LIBOR seeks to measure are no longer sufficiently active. Moreover, these markets are not the main markets that banks rely on for funding. The increase in the most widely used LIBOR rates in March put upward pressure on the financing cost of those paying LIBOR-based rates. For borrowers, this offset, in large part, the reductions in interest rates in the jurisdictions where central banks have lowered policy rates. Relevant national working groups are coordinating changes to intermediate milestones in their benchmark transition programs, where appropriate, to ensure global coordination. Financial and other firms should continue to ensure that their transition programs enable them to transition to LIBOR alternatives before the end of 2021. FSB members, in collaboration with other standard-setting bodies and international institutions, will continue to monitor developments.
Related Link: Press Release
Keywords: International, Banking, Insurance, Securities, COVID-19, LIBOR, Benchmark Reforms, G20, IBORs, FSB
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