Global Transition Roadmap for LIBOR
This roadmap sets out clear actions for financial firms and their clients to take in order to ensure a smooth LIBOR transition.
Interest rate benchmarks play a key role in global financial markets. In 2014 the FSB made recommendations to reform interbank offered rates (IBORs) in response both to cases of attempted manipulation and to declining liquidity in key interbank unsecured funding markets.
In July the FSB reaffirmed that financial and non-financial sector firms across all jurisdictions should continue their efforts to make wider use of risk-free rates in order to reduce reliance on IBORs where appropriate and in particular to remove remaining dependencies on LIBOR by the end of 2021. Additionally, in July 2020, the FSB and Basel Committee on Banking Supervision published a report on supervisory issues associated with benchmark transition, setting out recommendations for authorities to support financial institutions’ and their clients’ progress in transitioning away from LIBOR.
The LIBOR benchmarks are not guaranteed to continue to be available after end-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. Transition away from LIBOR by end-2021 requires significant commitment and sustained effort from both financial and non-financial institutions across many LIBOR and non-LIBOR jurisdictions.
This Global Transition Roadmap for LIBOR 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 end-2021 to successfully mitigate these risks. These are considered prudent steps to take to ensure an orderly transition by end-2021 and are intended to supplement existing timelines/milestones from industry working groups and regulators. Among the steps in the Roadmap:
- Firms should have already, identified and assessed all existing LIBOR exposures and agreed on a project plan to transition in advance of end-2021.
- By the effective date of the ISDA Fallbacks Protocol, the FSB strongly encourages firms to have adhered to the Protocol.
- By the end of 2020, firms should be in a position to offer non-LIBOR linked loans to their customers.
- By mid-2021, firms should have established formalised plans to amend legacy contracts where this can be done and have implemented the necessary system and process changes to enable transition to robust alternative rates.
- By end-2021, firms should be prepared for LIBOR to cease.