BOM Updates Guidance on LIBOR Transition in Mauritius
The Bank of Mauritius (BoM) updated the guidance on London Inter-Bank Offered Rate (LIBOR) transition. The guidance, which was first issued in April 2021, is aimed to assist banks in the transition process and sets out the key milestones and timelines that banks need to meet in their preparation process for the phasing out of LIBOR. The LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of all sterling, euro, Swiss franc, and Japanese yen settings, as well as the 1-week and 2-month US dollar settings; the remaining US dollar settings cease immediately after June 30, 2023.
To be fully prepared for the phasing out of LIBOR by end of 2021/30 June 2023, as applicable, BoM recommends the following milestones:
- By the end of the third quarter of 2021, banks should have conducted the risk and impact assessment, identified the mitigation measures, established a Board-approved transition plan, established organizational and operational structure to manage the transition, identified existing LIBOR exposures maturing after the end of 2021 and beyond, and ceased initiation of new LIBOR-linked products that expire after the end of 2021 (except for the USD LIBOR settings expiring after the end of June 2023).
- By the end of the third quarter of 2021, banks should also have started using alternative reference rates in new contracts as far as possible, communicated with clients about the LIBOR transition and the actions being taken to support the switch to alternative rates. They should have completed and tested necessary changes to key systems and processes to enable transition to alternative rates and ensured that necessary setup is available from Treasury Management Systems/vendors for determination and the use of term rates. Where possible, they should have completed the conversion of all legacy LIBOR-linked contracts expiring after end-2021/June 30, 2023 to alternative rates, and, if not feasible, ensured robust fallbacks are adopted.
- By the end of 2021, banks should have stopped offering new LIBOR-linked products in all LIBOR settings and all new business should be conducted using alternative risk-free rates. For any legacy contracts for which it has not been possible to make amendments, banks should have considered and discussed between the parties the implications of cessation or lack of representativeness of LIBOR settings ending at the end of 2021 and taken steps to prepare for this outcome as needed. By this time, they should also ensure that all critical processes and systems can be operated without reliance on LIBOR settings ending at the end of 2021 and use the alternative risk-free rates.
- By the end of June 2023, banks should, for any remaining USD LIBOR legacy contracts for which it has not been possible to make amendments, have considered and discussed between the parties the implications of cessation or lack of representativeness and taken steps to prepare for this outcome as needed. By this time, banks should also ensure that all critical processes and systems can be operated without reliance on USD LIBOR settings ending at the end of June 2023.
Keywords: Asia Pacific, Vietnam, Banking, Loan Moratorium, Loan Repayment, COVID-19, Credit Risk, SBV
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