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Treasury

Libor: Is benchmark reform back on track?

Coronavirus has hit preparations for the end of Libor, but pandemic-induced rate stability could actually help the transition.

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As the true impact of coronavirus started to become evident in March, it was clear that the already tight timetable for Libor transition was going to become even more challenging.

Marcus Morton, managing director valuation services at Duff & Phelps in London, told Euromoney at the time that if the transition process was “de-prioritised to the point where we get to September and nothing further has been done, then we face a real problem”.

Well, here we are, and in the intervening six months the only concrete development has been an acknowledgement that the complete transition away from Libor across all new sterling Libor-linked loans by the original target of the end of the third quarter of this year was unfeasible.

The Working Group on Sterling Risk-Free Reference Rates has recommended that, by the end of this month, lenders should be in a position to offer non-Libor-linked products to their customers, and should include clear contractual arrangements in all new and refinanced Libor-referencing loan products to facilitate conversion ahead of the end of next year.

The working group also recommends that new issuance of sterling Libor-referencing loan products that expire after the end of 2021 should cease by the end of the first quarter of next year.

So,

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