The Basel, Switzerland-based Financial Stability Board on Friday released a “global transition road map” to help financial firms navigate potential shifts away from the London Interbank Offered Rate, which is not guaranteed to be available after 2021.
While noting that the document “does not constitute regulatory advice or affect any transition expectations set by individual regulators,” the FSB said the road map’s steps “are considered prudent steps to take to ensure an orderly transition by end-2021,” when firms should “be prepared for Libor to cease.”
Beyond steps that the FSB recommends firms already to have taken, “[l]enders should be in a position to offer non-Libor linked loan products to their customers” by the end of 2020, the document said. By the middle of 2021, firms should have assessed their legacy contracts, determined which can be amended before the end of 2021 and contacted other parties to discuss next steps where Libor exposure extends beyond 2021. The FSB also recommended that firms be prepared to implement the recently finalized ISDA protocol for reference rate fallbacks.
