The Financial Conduct Authority ("FCA"), the Bank of England ("BoE") and the Sterling Risk-Free Reference Rates Working Group ("RFRWG") stated that the COVID-19 pandemic will delay the scheduled transition from sterling LIBOR-linked loans past the end-Q3 2020 target. The FCA said "it remains the central assumption that firms cannot rely on LIBOR being published after the end of 2021."
Under its revised timetable, RFRWG recommended that lenders should:
- be able to offer non-LIBOR-linked products by the end of Q3 2020;
- include "clear contractual arrangements" to support the conversion to the Sterling Overnight Index Average or alternative rates prior to the end of 2021; and
- by the end of Q1 2021, stop issuance of sterling LIBOR-referencing loan products that expire after 2021.
Additionally, the RFRWG, FCA and BoE reaffirmed their support for the RFRWG work plan in key areas, including:
- publishing an analysis on "tough legacy" contracts;
- offering input on how to calculate a fair credit spread adjustment in the transition from LIBOR in cash markets; and
- increasing communication with customers on moving away from LIBOR.
Originally published May 04, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
