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.
  • Overview
  • 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.
  • Status
  • 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.
  • 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.

Regulators FSB
Entity Types Auditor; Bank; BS; Corp; Depo; Exch; Ins; Inv Co; Pension; Servicer
Reference St P211121, PR, 11/22/2021; IBOR
Functions Accounting; Compliance; C-Suite; Financial; Legal; Operations; Reporting; Resolution; Risk; Trade Reporting; Trading; Treasury
Countries Global Regulator
Products Banking; Clearing; Corporate; Deposits; Derivatives; Fixed Income; Forex; Fund Mgt; Loan; Pensions; Repo/Reverse; Securities
Regions Global
Rule Type Guidance
Rule Date 11/22/2021
Effective Date 11/22/2021
Rule Id 122021
Linked to Rule :110429
Reg. Last Update 11/22/2021
Report Section International

Last substantive update on 11/23/2021