What is LIBOR?
LIBOR is an acronym for the London Interbank Offered Rate which is a measure of the average rate at which banks are willing to borrow wholesale unsecured funds. According to the Bank of England it is a major interest rate benchmark which underpins c.$300tn ($30tn in GBP markets) of financial contracts, including derivatives, bonds and loans.
What has changed?
The FCA announced in July 2017 that LIBOR would be phased out by the end of 2021.
How would the phasing out of LIBOR impact your business?
Buy-side firms such as asset managers and hedge funds are particularly impacted by the LIBOR transition as many of their products, such as interest rate derivatives, FRNs, ABS and loans, together with their custody and collateral arrangements reference LIBOR.
Although the contracts governing these products and arrangements may contain fallback provisions for LIBOR, these fallback provisions were designed for short term disruptions not the cessation of LIBOR, hence they are either economically inefficient or operationally untenable. As a result, any of your firm’s contracts which reference LIBOR will have to be amended to include either more robust fallbacks or an alternative rate.
How I can help?
I can provide legal advice and regulatory support to:
The above will all be done in line with your regulatory obligations to:
For more information, please contact Aneil Ramroop.
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