LIBOR transition


The interest rate benchmark LIBOR is expected to cease to have affect at the end of 2021. The FCA published a statement on the 19th November in relation to the conduct of risk arising from the LIBOR transition in response to a letter from the Working Group on Sterling Risk-Free Reference Rates. The FCA have stated that “supervision of firms’ transition away from LIBOR is focused on firms effectively managing the risks arising from transition, including prudential, operational and conduct risks” and outlined their core expectations that;

  • firms have a strategy in place and take necessary action during LIBOR transition
  • customers are treated fairly by following our rules and guidance

In a speech by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the Risk.net LIBOR Summit in London on 21st November 2019 he indicated notably that there were now liquid markets for swaps and futures based on SONIA – the market Sterling Risk Free Rate and stressed that there had been a number of landmark achievements in recent weeks which include “the successful conversion to SONIA of £4.2 billion in previously LIBOR-referencing securities – with some of these consent solicitations achieving 100% investor agreement – as well as new firsts for the conversion to SONIA of a LIBOR loan, and a first SONIA swaption”.

It is recommended that business should be in the process of preparing their LIBOR transitions plans in earnest as the best way to avoid LIBOR-related risks is to move off LIBOR altogether.

The FCA statement can be found here and the speech by Mr Schooling Latter here.

Neil Smart is head of the Regulatory Services Department at Sintons. To speak to Neil about this or any other matter, contact him on 0191 226 3731 or Neil.Smart@sintons.co.uk.


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