The statement says that the Working Group, FCA and Bank of England recognise that it will not be feasible to complete transition away from LIBOR across all new sterling LIBOR linked loans by the original end-Q3 2020 target. There will likely be a continued use of LIBOR linked loans into Q4 2020 to maintain the smooth flow of credit. The Working Group therefore recommends:
- By the end of Q3 2020 lenders should be in a position to offer non-LIBOR linked products to their customers;
- After the end of Q3 2020 lenders should include clear contractual arrangements in all new and re-financed LIBOR-referencing loan products to facilitate conversion ahead of end-2021, through pre-agreed conversion terms or an agreed process for renegotiation, to SONIA or other alternatives; and
- All new issuance of sterling LIBOR-referencing loan products that expire after the end of 2021 should cease by the end of Q1 2021.
Essentially, the original Q3 2020 target for no new LIBOR linked loans to be issued has been pushed back to Q1 2021. The target to include contractual conversion mechanisms in all loans issued from Q3 2020 will nonetheless constitute an ambitious goal for lenders and borrowers to meet.