23 Jun FSB Global Benchmark Reform (LIBOR) – COVID-19 Impact
June 23, 2020 – FSB has discussed the impact of covid-19 crisis on global benchmark transition. FSB’s Official Sector Steering Group (OSSG) is monitoring the developments closely and recognizes that some aspects of firms’ transition plans are likely to be disrupted.
The FSB maintains its view that financial and non-financial sector firms across all jurisdictions should continue their efforts in making wider use of risk-free rates. So as to reduce reliance on IBORs where appropriate and to remove remaining dependencies on LIBOR by end of 2021 and LIBOR transition remains an essential task.
Covid-19 has highlighted that underlying markets LIBOR seeks to measure are no longer sufficiently active; these markets are not the main markets that banks rely upon. An increase in most widely used LIBOR rates in March put upward pressure on financing cost of those paying LIBOR-based rates; for those borrowers, this offset the reductions in interest rates in those jurisdictions where central banks have lowered policy rates.
Relevant national working groups are coordinating changes to intermediate milestones in the benchmark transition program, where appropriate, to ensure global coordination.
Financial and other firms should continue to ensure that their transition program enables them to transition to LIBOR alternatives before end-2021. LIBOR transition is a G20 priority, and G20 in its February 2020 communique asked FSB to identify remaining challenges to benchmark transition by July 2020.
For more information, visit www.fsb.org