On 18 December 2019, the Financial Stability Board (FSB) published its annual progress report on the implementation of its 2014 recommendations to reform major interest rate benchmarks.

The report emphasises that the continued reliance of global financial markets on LIBOR poses risks to financial stability and the FSB calls for significant and sustained efforts by the official sector and by financial and non-financial firms across jurisdictions to transition away from LIBOR by end-2021.

Key points in the report include:

  • across all FSB jurisdictions covered by the report, whether moving away from one of the IBOR rates or still pursuing a multiple rate approach, there is a common view that the use of overnight risk-free rates should be encouraged across global interest rate markets where appropriate, and that contracts referencing IBORs should have robust fallbacks;
  • the transition away from LIBOR requires significant commitment and sustained effort from both financial and non-financial firms across many jurisdictions to reduce risks to financial stability ahead of the end of 2021. Firms need to end the use of LIBOR in new contracts as soon as possible and, where possible, to accelerate their efforts to remove their reliance on LIBOR within legacy contracts; and
  • there has been good progress in many derivative and securities markets, but transition in lending markets has been slower, and needs to accelerate.