On 30 November 2020 the Federal Reserve Board of Governors , the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency also issued a statement indicating their consensus with the views of the IBA and the FCA on the extension of the USD LIBOR deadline to 30 June 2023 , and reiterating the need for banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by 31 December 2021 .
In our view any extension of the deadline for IBA to cease to publication of USD LIBOR until 30 June 2023 should , at this stage , only be regarded as a reprieve for what the FCA terms “ tough legacy contracts ” or those LIBOR linked contracts that mature before 30 June 2023 .
By way of contrast to USD LIBOR , the FCA has set a deadline of Q1 2021 for market participants to stop entering into new loans underpinned by GBP LIBOR if the loan matures after 31 December 2021 . By Q1 2021 , the “ Working Group on Sterling Risk-Free Reference Rates ” expects all financial institutions to have completed their assessment of LIBOR-linked loans maturing after 31 December 2021 . In the last 12 months we have seen rapid progress on the methodology for backward looking Risk Free Rates (“ RFRs ”), which has undoubtedly brought greater clarity to the LIBOR transition process . In the loan market in particular there have already been a number of high profile debt facilities entered into using RFRs . The market has already come a long way in relation to its transition away from “ the world ’ s most important number ” and we expect further progress to be made in 2021 so as to ensure that the regulators ’ goal of an “ orderly – and safe and sound – LIBOR transition ” can be achieved .
Contacts
Oliver Irwin
Partner , London
T : + 44 .( 0 ). 207.448.4228 E : oliver . irwin @ bracewell . com
Bagyasree Nambron
Senior Associate , London
T : + 44 .( 0 ). 207.448.4218 E : bagya . nambron @ bracewell . com
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