FCA and the Bank of England have issued a press release titled “The final countdown: Completing sterling LIBOR transition by end-2021”. The document stresses that with the LIBOR administrator, ICE Benchmark Administration, consulting on ceasing publication of all sterling LIBOR rates at the end of 2021, only one year remains for firms to remove their reliance on sterling LIBOR.
In connection with this, the Working Group on Sterling Risk-Free Reference Rates has published an update to its priorities and roadmap for the final year of transition to help businesses to finish planning the steps they will need to take in the coming months.
In particular the Working Group has recommended that, from the end of March 2021, sterling LIBOR is no longer used in any new lending or other cash products that mature after the end of 2021. Throughout the remainder of the year, existing contracts linked to sterling LIBOR should be actively transitioned where possible.
Whilst regulators anticipate that the large majority of sterling markets will be based on SONIA compounded in arrears, in certain specific parts of the market, participants may need access to alternative rates. The press release notes that term SONIA reference rates (TSRRs) are beginning to be made available by various providers. The Working Group has engaged with the FICC Markets Standards Board (FMSB) to support development of a market standard for appropriately limited use of TSRRs. The proposed FMSB standard is under review by key stakeholders during January and is expected to be released for public comment in February.