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FSB Publishes Libor Transition Roadmap

The Financial Stability Board (FSB) has published a global transition roadmap for Libor that sets out a timetable of actions for financial and non-financial sector firms to take in order to ensure a smooth transition by end-2021.

In July the FSB reaffirmed that financial and non-financial sector firms across all jurisdictions should continue their efforts to make wider use of risk-free rates in order to reduce reliance on Ibors where appropriate and in particular to remove remaining dependencies on Libor by the end of 2021.

The FSB reiterates that the Libor benchmarks are not guaranteed to continue to be available after end-2021 and says that preparations should be underway to reduce reliance on these rates well ahead of that point. It adds that the transition requires “significant commitment and sustained effort” from both financial and non-financial institutions across many Libor and non-Libor jurisdictions.

The global body says the Global Transition Roadmap for LIBOR is intended to inform those with exposure to Libor benchmarks of some of the steps they should be taking now and over the remaining period to end-2021 to successfully mitigate these risks. These are considered prudent steps to take to ensure an orderly transition by end-2021 and are intended to supplement existing timelines and milestones from industry working groups and regulators.

The FSB says that firms should have already, identified and assessed all existing Libor exposures and agreed on a project plan to transition in advance of end-2021. In addition, by the effective date of the ISDA Fallbacks Protocol, which was recently given an important seal of approval by global regulators, the FSB strongly encourages firms to have adhered to it.

By the end of 2020, firms should also be in a position to offer non-Libor linked loans to their customers, and by mid-2021, firms should have established formalised plans to amend legacy contracts where this can be done and have implemented the necessary system and process changes to enable transition to robust alternative rates.

Unsurprisingly, given the deadline, the FSB says by the end of 2021, firms should be prepared for Libor to cease.

Colin Lambert

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