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Despite the impact of Covid-19, last year saw significant progress for LIBOR transition in the sterling market. To name just a few developments: recommended loan conventions have been agreed by the industry, all lenders should have been including alternative rates in their product offerings, the ISDA IBOR Fallback Protocol opened for adherence to remediate legacy derivative contracts, and work was identified and initiated to help resolve the issue of 'tough legacy? contracts. As 2021 begins the industry is in a positive position, but there are still challenges with transition and with less than one year to go until the expected end of GBP LIBOR, it is important that all market participants maintain momentum.
In January the Working Group for Sterling Risk Free Reference Rates published its high-level priorities and roadmap for the year ahead. By the end of Q1 2021 market participants are expected to cease initiation of new GBP LIBOR linked loans, bonds, securitisations and linear derivatives that will expire after the end of 2021. Once this milestone has been reached, market participants will be striving to complete active conversion where viable of all legacy GBP LIBOR contracts expiring after end 2021 by the end of Q3 of this year. If is not viable, they will ensure robust fallbacks are adopted where possible. Powers are expected to be progressed by the Financial Conduct Authority (FCA) on 'tough legacy? contracts which cannot be transitioned off LIBOR through active conversation or fallback mechanisms.
Preparation for these milestones is no small feat. To help market participants navigate the changes of the year to come UK Finance, with the support of PwC, has developed a guide for banks and lenders on the discontinuation of LIBOR. The Guide sets out where we are with transition at the start of 2021 and identifies the actions firms may need to take now to ensure they are ready to meet the various LIBOR implementation deadlines. It also provides a UK-focused introduction to regulatory, commercial and operational challenges of LIBOR transition, supplemented by a useful checklist for potential practical next steps to transition away from LIBOR with minimal disruption.
There are a large number of resources now available to support market participants to prepare and, where appropriate, act for transition in accordance with industry recommendations. This Guide is a useful starting point to help firms assess if they are up to date and on track, and provides links to relevant further information.
The move away from LIBOR continues to be one of the biggest undertakings facing our members and if firms are still uncertain as to how they should be preparing, securing an understanding of the next steps cannot be put off any longer. The clock is ticking - to achieve transition with minimum disruption, now is the time to clear the final hurdles.
Business customers impacted by the transition away from LIBOR can find out more on how to prepare with our parallel guide, Discontinuation of LIBOR - Guide for business customers. For more information on our work on the move away from LIBOR, please contact the LIBOR transition team at firstname.lastname@example.org.
Free Webinar: LIBOR Transition - part of the Regulatory Roadmap series, Thursday 18 March | 12:00 - 13:00?
2021 is a crucial year for the LIBOR transition project, with the end of Q1 marking a significant milestone in the national working group's roadmap for ending GBP LIBOR issuance. This session, in collaboration with TLT, will aim to provide members with an update on the transition, set against the context of the ongoing pandemic, and the latest guidance issued by regulatory authorities and the national working group as we enter the final year of GBP LIBOR's life.
Daniel Cichocki, Director, LIBOR Transition; Commercial Finance, UK Finance
This session, in collaboration with TLT, will aim to provide members with an update on the transition, set against the context of the ongoing pandemic, and the latest guidance issued by regulatory authorities and the national working group as we enter the final year of GBP LIBOR's life.