The LIBOR administrator, ICE Benchmark Administration, is consulting on ceasing publication of all sterling LIBOR settings at the end of 2021, leaving just one year for firms to remove their remaining reliance on these benchmarks.
This issue touches numerous parts of the economy. LIBOR has been embedded in the financial system for many years, used to calculate interest in everything from corporate borrowing and intra-group transfers, to complex derivatives. It is also utilised in accounting practices, system infrastructure and other supporting functions. All of these will need to be ready to use alternative reference rates, such as SONIA, by the end of this year.
The Bank of England and the FCA have set out expectations for regulated firms to remove their reliance on LIBOR in all new business and in legacy contracts, where feasible. The primary way for market participants to have certainty over the economic terms of their contracts is to actively transition them away from LIBOR.
In support of this, the Working Group on Sterling Risk-Free Reference Rates (the Working Group) has published an update to its priorities and roadmap for the final year of transition to help businesses to finish planning the steps they will need to take in the coming months. The Working Group’s priority is for markets and their users to be fully prepared for the end of sterling LIBOR by the end of 2021. In particular the Working Group has recommended that, from the end of March 2021, sterling LIBOR is no longer used in any new lending or other cash products that mature after the end of 2021.
The Bank of England and the FCA say they will continue to work closely with firms to secure a smooth transition. In particular, supervisors of regulated firms will continue to expect transition plans to be executed in line with industry-recommended timelines across sterling and other LIBOR currencies. Senior managers with responsibility for the transition should expect close supervisory engagement on how they are ensuring their firm’s progress relative to industry milestones.
Tushar Morzaria, chair of the Working Group on Sterling Risk-Free Reference Rates, said: “Lenders should now be in a position to offer loans based on SONIA or other LIBOR alternatives. I encourage all end users to engage with their lenders and trade associations as early as possible to ensure a smooth transition.”
Edwin Schooling Latter, director of markets and wholesale policy at the FCA, said: “The end-game for LIBOR is now increasingly clear. Firms should now have everything they need to shift new business to SONIA and to complete their plans for transition of legacy exposures. There is no longer any reason for delay.”
.jpg)
Financial institutions were early adopters of cyber security and insurance. Are they still on top of the game?
Managing huge amounts of sensitive data online makes financial institutions a prime target for hackers. As such, the sector was an early cohort for insurers in creating cyber cover. Since then, the market has evolved almost beyond recognition. It continues to challenge itself to this day, complying with rigorous regulatory demands and implementing avant-garde enhancements to keep abreast of the ever-changing risks. Published June 2021
Manufacturing: An industry at risk amid great technological change
Of the many sectors of business, manufacturing companies are among the most at risk from cyber threats. How has the sector evolved to make it so vulnerable and what does the task of managing cyber exposure in a manufacturing company look like? CIR’s latest podcast with Tokio Marine HCC sought to answer all these questions and more. Published April 2021
© 2019 Perspective Publishing Privacy & Cookies
Recent Stories