Shearman & Sterling LLP | FinReg | UK Working Group Updates LIBOR Expectations in Wake of COVID-19
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  • UK Working Group Updates LIBOR Expectations in Wake of COVID-19

    The U.K. Financial Conduct Authority has announced a series of updates to the Working Group on Sterling Risk-Free Reference Rates’ proposed implementation of LIBOR reforms. In March 2020, the RFRWG published a roadmap for the discontinuation of new sterling LIBOR lending by the end of Q3 2020. The FCA, Bank of England and RFRWG now acknowledge that, in light of the COVID-19 pandemic, it will no longer be feasible to transition away from LIBOR across all sterling LIBOR-linked loans by this proposed deadline. The RFRWG has therefore proposed the following:
    • Lenders should be in a position to offer customers non-LIBOR-linked products by the end of Q3 2020;
    • Lenders should include contractual arrangements to facilitate conversion from LIBOR to SONIA (or other alternatives) before the end of 2021 for all new and refinanced LIBOR-linked loan products entered into after the end of Q3 2020; and
    • After Q1 2021, there should be no new issuances of sterling LIBOR-referencing loan products that expire after the end of 2021.

    The FCA and U.K. Prudential Regulation Authority have also announced their intention to resume full supervisory engagement with dual-regulated firms on their LIBOR transition progress from June 1, 2020. This includes data reporting from the end of Q2, which was temporarily suspended at the end of Q1 in light of the COVID-19 pandemic.

    View the FCA's announcement on LIBOR reforms.

    View details of the RFRWG's Roadmap for ceasing sterling LIBOR lending.

    Details of other regulatory responses to COVID-19 are available at our COVID-19 Research Center.

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