On 21 November 2019, Edward Schooling Latter, Director of Markets and Wholesale Policy at the FCA delivered an insightful speech at the Risk.net LIBOR summit, titled ‘Next steps in transition from LIBOR’

On 21 November 2019, Edward Schooling Latter, Director of Markets and Wholesale Policy at the FCA delivered an insightful speech at the Risk.net LIBOR summit, titled ‘Next steps in transition from LIBOR’

Interesting points include (direct quotes):

  • ‘The sterling RFR Working Group has set a target of Q3 2020 to stop new lending using LIBOR. This will involve significant infrastructure and documentation preparation, customer communication and staff training exercises for some banks. The main IT system providers in this area have described to the Working Group their planned new product releases.’

 

  • ‘One of the largest providers plans to make available its SONIA loans product on 29 November.’

 

  • ‘The often-heard argument that borrowers who value certainty of payments need forward-looking term rates often doesn’t hold much water. For those whose priority is payment certainty, fixed rates may be best.’

 

  • ‘The Group expects overnight compounded rates to be the norm in derivatives, securities and wholesale loans.’

 

  • ‘In some more retail markets, where simplicity or payment certainty is the key factor, fixed rates, or base rate may be preferred.’

 

  • ‘The prudential risks are rising given uncertainty about the existence of the rate and how the properties of the rate (eg its volatility) or the depth of liquidity in LIBOR instruments will change as the end of LIBOR approaches.’

 

  • ‘It is no longer credible for any regulated firm to claim it did not know LIBOR might not survive this date.’

Read the full speech here-

https://www.fca.org.uk/news/speeches/next-steps-transition-libor