On 19 September 2018, the Prudential Regulation Authority (PRA) and FCA jointly published a Dear CEO letter to banking firms on firms’ preparations for the transition from LIBOR to risk-free rates (the Letter). The purpose of the Letter is to seek assurance that firms’ senior managers and boards understand the risks associated with the LIBOR transition and are taking appropriate measures to transition to alternative rates ahead of end-2021.

The Letter gives background to the reforms to LIBOR, and expresses that, due to how embedded LIBOR is in current business practices, insufficient preparedness to prepare for the transition to alternative rates may be detrimental to both firms and investors. The Letter also states some of the current efforts being taken to address the challenges posed by the transition process.

A response to the Letter is requested from firms, detailing:

  1. a board-approved summary of a firms’ assessment of key risks relating to LIBOR discontinuation and details of actions that firm plans to take to mitigate those risks; and
  2. the Senior Manager(s) within a firm who will oversee the provision of the response to the Letter and the implementation of its transition plans.

The deadline for responses is 14 December 2018.