FSB LIBOR Cessation Preparedness
On Nov. 22, FSB urged swift action on preparedness for cessation.
- FSB has published a statement to support preparations for LIBOR cessation.
- With only a few weeks remaining for 2021 end is now critical market participants act urgently to complete any remaining steps set out in FSB's global transition roadmap.
- Follows FSB Jul. 2021 issued progress report to G20 on LIBOR transition see #110429.
- Most LIBOR panels will cease at Dec. end with certain key USD settings continuing until end-Jun. 2023 to support legacy contracts rundown, executed pre Jan. 1, 2022.
- Continued reliance of global financial markets on LIBOR poses risks to global financial stability; global and national financial regulators will be closely monitoring progress.
- Significant progress made in transitioning to Risk-Free Rates (RFRs) but market participants still need to finalize preparations to cease new use of LIBOR by end-2021.
- Considering significant use of USD LIBOR globally, FSB still believes it is particularly important to reinforce message of no interruption to new business and financing.
- FSB recognizes widespread use of USD, other LIBORs in emerging markets, developing economies (EMDEs), considers engagement with them is key part of LIBOR transition.
- The transition should be primarily to overnight RFRs, the most robust benchmarks available, to avoid reintroducing the weaknesses of LIBOR.
- In some cases there may be a role for RFR-derived term rates, set out circumstances where limited use of RFR-based term rates would be compatible with financial stability.
- It is crucial that potential alternative rates to LIBOR are especially robust and reflect credible underlying markets underpinned by a sufficient volume of transactions.
- Main Message
- Emphasizes active transition of legacy contracts remains best way for participants to have control and certainty over their contract terms, provides a permanent solution.
- But also the ability to move to overnight RFRs, compounded in arrears; synthetic LIBOR is being made available as temporary bridging solution for legacy contracts only.
- It should not be directly/indirectly referenced in any new contracts; FSB will continue to monitor the final steps in completing LIBOR transition over the coming months.
- The FSB will review most issues in mid-2022 and assess the implications for any further supervisory and regulatory cooperation that may be required.
||Auditor; Bank; BS; Corp; Depo; Exch; Ins; Inv Co; Pension; Servicer
||St P211121, PR, 11/22/2021; IBOR
||Accounting; Compliance; C-Suite; Financial; Legal; Operations; Reporting; Resolution; Risk; Trade Reporting; Trading; Treasury
||Banking; Clearing; Corporate; Deposits; Derivatives; Fixed Income; Forex; Fund Mgt; Loan; Pensions; Repo/Reverse; Securities
|Reg. Last Update
Last substantive update on 11/23/2021