Featured Product

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    October 16, 2020

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR). The roadmap sets out a timetable of actions for financial and non-financial sector firms to take to ensure a smooth LIBOR transition by the end of 2021. This roadmap is intended to inform those with exposure to LIBOR benchmarks of some of the steps they should be taking now and over the remaining period to the end of 2021 to successfully mitigate these risks. These prudent steps are intended to supplement the existing timelines or milestones from industry working groups and regulators.

    The LIBOR benchmarks are not guaranteed to continue to be available after the end of 2021 and, therefore, preparations should be underway to reduce reliance on these rates well ahead of that point. Use of LIBOR in the five LIBOR currencies (USD, GBP, EUR, JPY, and CHF) is widespread internationally. As such, transition away from LIBOR by the end of 2021 requires significant commitment and sustained effort from both financial and non-financial institutions across many LIBOR and non-LIBOR jurisdictions. The roadmap sets out clear actions, including the following, needed from financial firms and their clients to ensure a smooth LIBOR transition:

    • Firms should have already identified and assessed all existing LIBOR exposures and agreed on a project plan to transition in advance of the end of 2021. The firms that currently provide clients with products that reference LIBOR should have begun to implement a plan for communicating with end-users of LIBOR referencing products maturing beyond the end of 2021 to ensure that they are aware of the transition and the steps being taken to support moving those products to alternative reference rates.
    • By the effective date of the ISDA Fallbacks Protocol, FSB strongly encourages firms to have adhered to the Protocol subject to individual firms’ usual governance procedures and negotiations with counterparties, as necessary. Where the protocol is not used, other appropriate arrangements will need to be considered to mitigate risks. Providers of cleared and exchange-traded products linked to LIBOR should also ensure that these products incorporate equivalent fallback provisions as appropriate.
    • By the end of 2020, firms should be in a position to offer non-LIBOR-linked loans to their customers. This could be done either in terms of giving borrowers a choice in terms of the reference rate underlying their loans, or by working with borrowers to include language for conversion by the end of 2021 for any new, or refinanced, LIBOR-referencing loans.
    • By mid-2021, firms should have established formalized plans to amend legacy contracts and should have implemented the necessary system and process changes to enable transition to robust alternative reference rates. 
    • By the end of 2021, firms should be prepared for LIBOR to cease. All new business should either be conducted in alternative reference rates or be capable of switching at limited notice. For any legacy contracts for which it has not been possible to make these amendments, the implications of cessation or lack of representativeness should have been considered and discussed between the parties and steps taken to prepare for this outcome, as needed. All business critical systems and processes should either be conducted without reliance on LIBOR or be capable of being changed to run on this basis at limited notice.

     

    Related Links

    Keywords: International, Banking, Securities, LIBOR, Fallback Protocol, Legacy Contracts, Roadmap, Benchmark Reforms, FSB

    Related Articles
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News
    News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697