The end date for LIBOR is just months away. For those treasurers who haven’t acted already, now is the time to identify LIBOR exposures, have a contingency plan for accidental oversights, and understand the different challenges presented by the new market risk-free rates.
Following years of planning and speculation, 5 March 2021 saw the cessation dates for the publishing of the London Inter-bank Offered Rate (LIBOR) confirmed by both the UK Financial Conduct Authority (FCA) and LIBOR’s administrator, ICE Benchmark Administration (IBA). This brought some much-needed clarity to the LIBOR transition timetable for banks and corporate treasurers. The outcome of these statements is that 30 LIBOR settings – all non-US dollar tenors plus one-week and two-month US dollar LIBOR – will either cease or become non-representative after 31 December 2021, while the remaining five US dollar LIBOR settings will continue to be published on a representative basis until 30 June 2023. For treasurers, the rapidly approaching end-of-year deadline is the one to be working towards.
Head of Public Affairs & Policy, European Association of Corporate Treasurers (EACT)
“Treasurers need to have things in place by 31 December, there is no other option,” explains Tarek Tranberg, Head of Public Affairs & Policy, European Association of Corporate Treasurers (EACT). “For example, in the sterling markets it is already strongly discouraged that companies take on new exposures that still reference sterling LIBOR, unless for risk management of existing positions in the derivatives market.” he says. “The key expectation from the industry-led Working Group on Sterling Risk-Free Reference Rates for all market participants is that any new sterling derivatives that expire after the end of 2021, entered into after the recommended milestones, be based on SONIA [Sterling Overnight Index Average].”