LIBOR Transition Advisory Newsletter - March 2021

The FCA has confirmed the final date for the majority of LIBOR tenors and currencies. After December 31, the panel banks will no longer be required to submit their rates and LIBOR will no longer be usable as a benchmark. The confirmation reinforces the determination of the regulators to end reliance on the LIBOR rates, moving instead to using transaction based rates such as SONIA and SOFR.

Along with the imminent deadline for new Sterling LIBOR loans issuance at the end of Q1, the end of the consultation on Sterling LIBOR bonds and the increased scrutiny from the U.S. Federal Reserve on U.S. banks’ LIBOR transition plans, it is clear that we are entering the final phase of the retirement of LIBOR.

The expectation from now on can only be an increase in pressure to accelerate transition of both new business and legacy portfolios ahead of the December 31 deadline.

LIBOR Highlights

General Highlights

Planning for a Successful Transition of Intercompany Libor Positions, from the Kroll team: Jennifer Press, Stefanie Perrella, David Ptashne, Bloomberg Tax

• With the end of LIBOR approaching, multinational companies should assess potential exposure points and develop a transition strategy to identify and replace references and dependencies, including with respect to intercompany positions.  

Euribor and a Global IBOR Overview, ING

• Euribor has been reformed to meet the regulatory requirements for a published benchmark. However, instruments that reference the rate are still required to have fallback language incorporated into them so there still needs to be work in the transition.

Libor Transition: Self-Assessment Tool for Banks, OCC

• The OCC published a self-assessment tool for banks to evaluate their preparedness for the expected cessation of LIBOR.

2021 Examination Priorities, SEC

• The SEC has officially announced their examination priorities for fiscal year 2021, marking the ninth year of their publication.

Regulatory Updates

Announcements on the end of LIBOR, FCA

• The FCA has announced the dates that panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available. This is an important step towards the end of LIBOR, and the Bank of England and FCA urge market participants to continue to take the necessary action to ensure they are ready.

ISDA Statement on UK FCA LIBOR Announcement, ISDA

• ISDA sets out the implications of the FCA announcement for the ISDA transition protocol.

Perspectives Paper: IBOR Reform - A Valuation Guide, IVSC

• The International Valuation Standards Committee provides insight on the valuation and reporting issues created by the LIBOR transition.

Feds Dials Up Pressure on Wall Street to Ditch Discredited LIBOR, Bloomberg

• The Federal Reserve is intensifying its scrutiny of banks’ efforts to shed their reliance on LIBOR and has begun compiling more detailed evidence on their progress.

Market Details

GBP Loan Market Q&A for the Working Group’s end-Q1 2021 Recommended Milestone, Bank of England

• The regulators continue to implement their timeline for the LIBOR transition with the anticipated end of new Sterling LIBOR loan issuance at the end of March.