How will we transition to a LIBOR free world?

Nice speech by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the FCA of UK.

There is now wide recognition that LIBOR will come to an end. Thanks to the agreement reached with 20 panel banks to continue submitting until end 2021, LIBOR is not expected to cease before that point. But, when I spoke at the International Swaps and Derivatives Association’s (ISDA’s) annual Europe conference in September last year, on this same stage, an audience poll found just over 50% thought LIBOR would stop before end-2022. Today, I would like to explore in a bit more detail not whether LIBOR will end, but how it will end.

This has important implications for contractual design. It is relevant in particular to how ’fallback‘ language in outstanding contracts that continue to reference LIBOR will and should work. Understanding the way in which the end of LIBOR will play out is key to choosing the right trigger point for moving to a new or replacement ‘fallback‘ rate.  

It will be quite something to forget LIBOR in our minds as well…

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