FSB Urges Action to Complete LIBOR Transition

The Financial Stability Board (FSB) today published a progress report to the G20 on LIBOR transition and remaining issues.

With timelines for cessation of LIBOR panels now confirmed, there should be no remaining doubts as to the urgency of the need to transition away from LIBOR by the end of 2021. The FSB encourages authorities to set globally consistent expectations and milestones that firms will rapidly cease the new use of LIBOR, regardless of where those trades are booked or in which currency they are denominated. Market participants are urged to cease new use of LIBOR in all currencies as soon as practicable, respecting national working group timelines and supervisory guidance where applicable, and in any case no later than the end of 2021.

Given the extent of risks associated with a failure to prepare adequately for LIBOR transition, the onus is now on firms to act. With limited time available until end-2021, the FSB strongly urges market participants to act now to complete the steps set out in its Global Transition Roadmap. Financial and non-financial institutions need to accelerate adoption of robust benchmark rates in new contracts, as well as active conversion of legacy LIBOR-referencing contracts to directly reference risk-free rates and/or insert robust fallback language.

Supervisory authorities should step up their efforts for active and adequate communication to increase awareness of the scope and urgency of relevant IBOR transitions for all clients. The FSB, through its Regional Consultative Groups, will undertake work to support transition in emerging market and developing economies, where engagement with financial institutions on transition planning is in general lagging.

Arthur Yuen, Deputy Chief Executive of the Hong Kong Monetary Authority and lead of the FSB team on supervisory issues related to LIBOR transition, said, “As end-2021 is fast approaching, it is crucial for authorities to monitor progress against expected milestones and maintain close supervisory dialogue with regulated financial institutions to ensure a smooth and robust transition.”

Andrew Bailey, Governor of the Bank of England and Co-Chair of the FSB’s Official Sector Steering Group said, “We are now in the final chapter in the global process to transition markets from LIBOR rates. Basing reference rates on insufficiently active markets creates a fundamental weakness, and transition from LIBOR needs to focus on addressing this. Using robust overnight risk-free rates that are based on large flows of actual transactions will help to create a more resilient and transparent financial system.”

John C. Williams, President of the Federal Reserve Bank of New York and Co-Chair of the FSB’s Official Sector Steering Group said, “In these final months until no new LIBOR, remember: we never want to repeat this transition again. So for the sake of global financial stability, choose robust, enduring reference rates. For US dollar LIBOR, that means building the transition on an unshakable SOFR foundation.”

Source: FSB

Related articles

  1. The firm also reported record emerging markets commission revenue.

  2. Market Volatility Boosts Options Volume

    Morgan Stanley CEO wants the Fed to raise rates in March.

  3. Lack of connection between the two markets in China has resulted in poor price discovery and liquidity.

  4. Management set key performance indicators to track progress of its strategic plan from 2020.

  5. The collaboration allows Citi to scale its fixed income ETF servicing business.