On 9 July 2020, the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (Basel Committee) issued a report on supervisory issues associated with benchmark transition. The report includes insights on remaining challenges to LIBOR transition based on surveys undertaken by the FSB, the Basel Committee and the International Association of Insurance Supervisors.
The report finds that most FSB jurisdictions have a strategy in place to address LIBOR transition, as opposed to only half of the surveyed non-FSB jurisdictions. The report also includes three sets of recommendations to support LIBOR transition that should generally be applicable to all jurisdictions with LIBOR exposures:
- Identification of transition risks and challenges – authorities and standard-setting bodies to issue public statements to promote awareness and engage with trade associations, and authorities to undertake regular surveys of LIBOR exposure and to request updates from financial institutions.
- Facilitation of LIBOR transition – authorities to establish a formal transition strategy supported by adequate resources and industry dialogue. Supervisory authorities should consider increasing the intensity of supervisory actions when the preparatory work of individual banks is unsatisfactory.
- Coordination – authorities to promote industry-wide coordination, maintain dialogue on the adoption of fall-back language, consider identifying legislative solutions, where necessary, and exchange information on best practices and challenges. The FSB and the standard-setting bodies will coordinate at the international level to identify key common metrics for monitoring transition progress.
The report will be delivered to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on 18 July 2020.