On October 16, the Financial Stability Board (FSB) published a global transition roadmap, including a timetable of actions to be taken by financial and non-financial institutions exposed to the London Inter-bank Offered Rate (LIBOR) benchmarks, to ensure a seamless transaction away from LIBOR by the end of 2021 (the Roadmap).
The key steps suggested by the FSB to mitigate the risks before the end of 2021 in the Roadmap include:
- by now, firms should have identified and assessed all existing LIBOR exposures, assessed the necessary changes to its systems and processes and devised a plan for communicating with end-users of LIBOR products maturing beyond the end of 2021 to ensure they are aware and supported through the transition;
- by the effective date of the ISDA Fallbacks Protocol (Protocol), firms are encouraged to adopt to the Protocol or consider making alternative arrangements to mitigate risk;
- by the end of 2020, lenders should be capable of offering non-LIBOR linked loan products to their customers by either offering a choice of reference rates underlying the loan or including language in the loan for a conversion by the end of 2021 for any new or refinanced LIBOR referencing loans;
- by mid-2021, firms should strive to establish formalized plans to modify legacy LIBOR-linked contracts to alternative reference rates and implement required system and process changes to enable the transition to robust alternative rates; and
- by the end of 2021, firms should be prepared for LIBOR to cease and conduct business in alternative rates or be in a position to switch rates efficiently.
The FSB emphasized the importance of all regulated financial institutions to have transparent LIBOR discussions with its home state and host state regulators throughout the transition period.
The FSB advised firms to monitor developments regarding other interbank offered rates relevant to its business.
The Roadmap is available here.