10 LIBOR Transition Focus Areas

Work is progressing on the transition away from the London Interbank Offered Rate (LIBOR), but not as fast as the regulators would like. On November 21, 2019, the UK’s Financial Conduct Authority (FCA) published a speech by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the FCA, on the transition from LIBOR. His speech outlined the progress made to date in anticipation of the end of 2021, after which the FCA will no longer compel or persuade banks to make LIBOR submissions. He acknowledged that while great strides have been made, there is still much work to do in transitioning to alternative, overnight near-Risk Free Rates (RFR). Meanwhile, the intervening COVID-19 pandemic — and attendant market volatility and liquidity issues — has diverted attention and resources away from LIBOR transition efforts. Regulators have acknowledged the challenges, but there is no evidence of plans to delay the established phase-out deadline. On March 25, 2020, the FCA, after discussions with the Bank of England and the Working Group on Sterling Risk-Free Reference Rates, published a statement confirming that “[t]he central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed and should remain the target date for all firms to meet.” The FCA published a follow-up statement on April 29, 2020, reiterating that central assumption.