BAFT, Trade Finance Groups Publish Report on Effects of Libor Transition

With the transition away from Libor now well underway, BAFT, the American Bankers Association subsidiary association for international transaction banking, and two other trade finance groups today published a new report discussing potential implications for the trade finance industry. The report combines responses from a quantitative survey along with qualitative insights from banks and corporations involved in trade finance.

While the Libor transition will have significant effects on trade finance, more than two-thirds of corporates surveyed said that they are not prepared to successfully transition all their Libor-linked exposures to an alternative reference rate by the dates specified by the Intercontinental Exchange, the administrator of Libor. (Certain tenors of Libor will cease publishing after Dec. 31, and all remaining tenors will cease publication after June 30, 2023.)

Just 13% of total corporate Libor exposures have already been transferred to an alternative reference rate, the report found. Most progress has been made in transitioning derivatives, swaps and futures, with 36% of corporates reporting they’ve made “a great deal of progress” in this area, and another 54% saying they have made “some progress.”

“Banks should continue to track currency-specific transition deadlines, intensify internal system and process preparations, and enhance and tailor communication with corporate clients,” said BAFT VP Diana Rodriguez. “Taken together, these steps will help to ease some of the uncertainty and pave a more solid path toward transition.”