Financial Stability Board Makes Recommendations to Support LIBOR Transition

The Financial Stability Board and Basel Committee on Banking Supervision have published a report to the G20 on supervisory issues associated with benchmark transition. The report focuses on the transition away from using LIBOR, but is relevant to other Interbank Offered Rates. The report presents the findings of a survey on the status of the move from using LIBOR, whose usage U.K. regulators are attempting to cease from the end of 2021, and sets out recommendations for relevant authorities and supervisors. The recommendations are:
 

1. Identification of transition risks and challenges: authorities and standard-setting bodies should: (i) issue public statements to promote awareness of the transition and related risks impacting financial institutions and the financial markets; (ii) engage with trade associations and (iii) undertake regular surveys of LIBOR exposure and request updates from financial institutions on their LIBOR transition plans.
2. Facilitation of LIBOR transition: authorities should establish a formal transition strategy supported by adequate resources and industry dialogue and supervisory authorities should consider increasing the intensity of supervisory actions when the preparatory work of individual banks is unsatisfactory.
3. Coordination: authorities should promote industry-wide coordination, maintain dialogue on the adoption of the fallback language, consider identifying legislative solutions, where necessary, and exchange information on best practices and challenges.

The FSB and the standard-setting bodies will coordinate at the international level to identify key common metrics for monitoring transition progress.

View the report on supervisory issues associated with benchmark transition.

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