On 17 September 2020, the FCA published a new web page, LIBOR transition: getting my firm ready. On this web page the FCA explains what firms need to know about LIBOR transition.
The web page starts by setting out information useful to all regulated firms concerning LIBOR transition. This includes that a key consideration of LIBOR transition is balance sheet exposure and how affected firms can move their stock of LIBOR linked contracts to alternative risk-free rates. Firms are directed to the FCA Dear CEO letter of September 2018 to the UK’s largest banks and insurers for information.
In addition, even if a firm has no balance sheet exposure, the FCA explains that such a firm may still be exposed to other risks from LIBOR transition. The regulator therefore expects boards and senior managers to put necessary arrangements in place to identify their firms’ exposures to LIBOR and to ensure their transition away from LIBOR, before the end of 2021, does not harm their clients or how markets operate.
The FCA also states that firms should conduct an end-to-end inventory of LIBOR exposure. Where firms identify that LIBOR transition will affect the finances and product choices available to their clients or require a contract amendment or renegotiation, the FCA expects firms to treat clients fairly and to communicate with them in a clear and timely manner.
The web page then provides information for specific firms based on the activities they undertake. The FCA states that this information will be periodically updated ahead of the end of 2021 and firms should regularly check it to see what the move away from LIBOR means. The activities covered are: asset management, benchmark administration, corporate finance (and similar) advice, custody services provision, principal trading and wholesale brokerage.