The Financial Stability Board has been monitoring closely the impact of Covid-19 on global benchmark transition. It recognises the challenges, but still thinks that both financial and non-financial sector firms across all jurisdictions should be making wider use of risk-free rates to reduce reliance on IBORs, and in particular to remove remaining dependencies on LIBOR by the end of 2021.
It says the Covid-19 pandemic has highlighted that the underlying markets LIBOR seeks to measure are no longer sufficiently active, nor are they the main markets banks rely upon for funding. It says that the increase in the most widely used LIBOR rates in March put pressure on the financing cost of those paying LIBOR rates which offset in large part the reductions in interest rates in jurisdictions in which central banks lowered policy rates.
LIBOR transition remains a G20 priority and FSB will continue to monitor developments.