On 28 October 2020, the Lending Standards Board and UK Finance published best practice guidance for firms on the transition of SMEs to non-LIBOR linked products.
The related press release notes that with less than 18 months to go until the discontinuation of LIBOR, it is imperative that firms deliver clear communications to SME customers, ensure their protection, and minimise the impact of LIBOR transition. The COVID-19 pandemic has created significant challenges for SMEs, underlying the need for support throughout the LIBOR transition process.
The recommendations cover:
- what firms can consider when selecting alternative rates such as SONIA;
- how firms can ensure that information is delivered in a way that enables customers to make informed decisions and measures to avoid poor customer treatment;
- how firms should approach the transition of existing LIBOR contracts; and
- the governance and oversight measures firms can put in place to ensure end-to-end fair customer treatment.
While the guidance focuses on SMEs, the authors note that it will be of interest to all stakeholders sharing the collective aim of migrating away from LIBOR onto robust replacement rates for the future.