At the end of 2020, we identified the following key issues to have in mind as we entered the LIBOR “endgame”:

  • Readiness, meeting the milestones set by relevant industry groups
  • Right time, the need to communicate with customers in a timely way
  • Right information, communicating in a way that’s clear, fair and not misleading
  • Right rate, using a fair replacement rate
  • Remaining contracts, managing “tough legacy”
  • Record keeping, the importance, not least for senior managers, of having a record of decisions and their rationale

The PRA and FCA have reinforced all these points in a Dear CEO letter published on 26 March 2021.

The issues raised in this Dear CEO letter are not unexpected. But that does not mean they are straightforward to manage. LIBOR transition remains a key challenge for financial institutions and a key area of regulatory scrutiny, and risk, throughout 2021.

While this guidance has been promulgated in a Dear CEO letter, it is impossible to miss that accountability for orderly transition is being placed on relevant Senior Managers, and the letter refers to a separate letter being sent to the senior managers at firms with the largest and most complex LIBOR exposures. The regulators have made it clear that failure to take appropriate steps in the remaining time will have consequences, highlighting that “As a key regulatory priority, we expect that this transition forms part of the performance criteria for determining their variable remuneration.”

For a more detailed analysis of the latest Dear CEO letter, see our FSR blog post.

Jenny Stainsby
Jenny Stainsby
Partner
+44 20 7466 2995
Rupert Lewis
Rupert Lewis
Partner
+44 20 7466 2517
Harry Edwards
Harry Edwards
Partner
+61 3 9288 1821
Nick May
Nick May
Partner
+44 20 7466 2617
Ceri Morgan
Ceri Morgan
Professional Support Consultant
+44 20 7466 2948