Will Pandemic Slow LIBOR Transition?
Regulators worldwide are struggling to keep pace with the fallout to the financial markets caused by the coronavirus disease. The Financial Times is reporting that the UK’s Financial Conduct Authority has put initiatives on hold, including probes of major banks, a survey of open-end funds, and assessments of companies’ disclosures of climate risks. Among UK initiatives that have global implications is the 2021 phaseout of LIBOR and implementation of an alternate benchmark lending rate. The FT reports there has been no official change to the LIBOR deadline, however the phaseout faced challenges even before the COVID-19 crisis that are only likelier now to be exacerbated. According to commentary from law firm DLA Piper, since it is unclear when regulators may step in on the LIBOR deadline, “[F]inancial institutions and their regulators should continue to proceed with LIBOR transition planning and implementation.” The lawyers note that any regulatory relief or legislative action also “could be incorporated into the LIBOR transition process to promote greater certainty and stability across markets.” They noted that on March 6 the Alternative Reference Rates Committee (ARRC) released a legislative proposal for the State of New York to consider for the purpose of increasing legal certainty associated with LIBOR transition.