UK Working Group on Sterling Risk-Free Reference Rates Publishes Paper on Ending New Use of GBP LIBOR-Linked Derivatives
02/24/2021The U.K. Working Group on Sterling Risk-Free Reference Rates has published a paper on how market participants can meet the Working Group's intended deadlines for cessation of GBP LIBOR in derivatives. The key deadlines are:
- End of Q1 2021: initiation of new GBP LIBOR-linked linear derivatives contracts expiring after the end of 2021 will cease;
- End of Q2 2021: initiation of new GBP LIBOR-linked non-linear derivatives expiring after the end of 2021 will cease;
- Q2-Q3 2021: initiation of new cross-currency derivatives with a LIBOR-linked sterling leg expiring after the end of 2021 will cease;
- End of Q3 2021: conversion of legacy GBP LIBOR-linked contracts will be completed where viable.
New derivatives contracts undertaken for the purposes of risk management for existing positions will be exempt from the above requirements. However, such contracts should be kept to a minimum and firms should establish clear internal governance and oversight of such contracts.
In May 2020, the Working Group published an updated timeline for the implementation of its proposed LIBOR reforms in light of the COVID-19 pandemic, extending the deadline for discontinuation of LIBOR.
View the Working Group's proposed path to ending new use of GBP LIBOR-linked derivatives.
View details of the Working Group's LIBOR implementation update.
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