Seventy-seven percent of financial institutions still do not have a comprehensive plan in place to transition away from the London Interbank Offered Rate, which is scheduled to sunset on Dec. 31, 2021, according to a new survey released by financial services consulting firm Duff & Phelps.
Nineteen percent of firms surveyed said they had not begun their Libor transition yet, while 4% did not believe they had Libor exposures, but had not conducted a formal review process. Meanwhile, 31% said they did find Libor exposures in their portfolio, but had not yet catalogued transitioned provisions, and another 23% had catalogued their Libor exposure, but weren’t sure what to do next.
“The results indicate that although the majority of firms have identified their Libor exposures, many have yet to formally catalogue the transition provisions,” said Duff & Phelps Managing Director Marcus Morton. “There is a real fear that many are pinning their hopes on fallback provisions written within existing contracts. The reality is that fallback language may not suit each and every party, and in some cases, contracts will fail if such provisions are inadequate. It will pay in the long term to properly assess exposure of each and every contract, even if firms are under the impression fallback language is sufficient.”