LIBOR: preparing for the transition
4 September: With regulators holding to their end of 2021 pre-COVID target date for LIBOR discontinuation, ICAEW has developed new helpsheets for stakeholders dealing with the phasing out of what was once ‘the world’s most important number’.
The London Inter-Bank Offered Rate (LIBOR) is one of the most important numbers in financial markets and the daily published rates are referenced in an estimated total of around US$400tn of financial contracts, including loans, mortgages, bonds, securitised products and derivatives.
It is due for discontinuation by the end of 2021 and even in these pandemic-affected times, the regulatory community has remained consistent in its messaging that firms should prepare for post-LIBOR life by the end of 2021. Therefore, the transition needs to continue at pace and the latest announcements show that the clock is ticking. A recent speech by the Governor of the Bank of England, Andrew Bailey, titled “entering the end-game”, couldn’t be clearer in setting out this message.
For the majority of stakeholders, LIBOR’s replacement with overnight risk-free rates (RFRs) will be far-reaching. It will be more than a 'find and replace' task because the new replacement rates are very different in their construction to LIBOR.
To help members tackle this head-on, ICAEW has formed a working party on LIBOR transition, focussed on developing guidance to help a wide range of stakeholders manage the transition in an orderly manner.
Over the last three months, the LIBOR Transition Working Party has developed a range of content, which is now available on a dedicated webpage: LIBOR transition – what you need to know.
This webpage outlines the things all businesses need to do now to prepare for the end of LIBOR. It contains a series of “10-question” style documents aimed as helpsheets for users, covering topics including:
- NED considerations
- Accounting and disclosures
- External audit
- Internal audit
- Conduct risk management.
The page also houses a series of articles, blogs and webinars on transition, as well as links to the regulatory-convened working groups across the jurisdictions, should you need some further reading on the topic. The transition timeline, and content, will be updated on an ongoing basis.
The material generated by the group will be shared nationally and internationally to support the reputation of the profession and the value it can bring.
Read more: LIBOR transition – what you need to know.