Perhaps responding to complaints about the lack of global coordination of transition for the expected cessation of LIBOR by December 31, 2021, the Financial Stability Board (“FSB”) issued a Global Transition Roadmap (“GTR”) for LIBOR on October 16.
Last July, the FSB reaffirmed that financial and non-financial sector firms across all jurisdictions should continue their efforts to make wider use of risk-free rates in order to reduce reliance on IBORs where appropriate, and in particular to remove remaining dependencies on LIBOR by the end of 2021. Also in July 2020, the FSB and Basel Committee on Banking Supervision published a report on supervisory issues associated with benchmark transition, setting out recommendations for authorities to support financial institutions’ and their clients’ progress in transitioning away from LIBOR.
The GTR sets forth what the FSB considers to be prudent steps to take to ensure an orderly transition by end-2021. These steps are intended to supplement existing timelines/milestones from industry working groups and regulators. Among the steps in the GTR:
- Firms should have already identified and assessed all existing LIBOR exposures and agreed on a project plan to transition to alternative benchmark rates in advance of end-2021.
- By the effective date of the ISDA Fallbacks Protocol, the FSB strongly encourages firms to have adhered to the Protocol.
- By the end of 2020, firms should be in a position to offer non-LIBOR linked loans to their customers.
- By mid-2021, firms should have established formalized plans to amend legacy contracts where this can be done, and have implemented the necessary system and process changes to enable transition to robust alternative rates.
By end-2021, firms should be prepared for LIBOR to cease.