Transition Challenges of IBOR Replacement – Into the Unknown

The IBOR transition is both an opportunity and a threat to every financial institution. The opportunity is that a clean, well-managed IBOR transformation will enable a firm to take advantage of the possibilities that arise from changing one of the foundations of current financial markets. The threat is that a poorly managed, lagging transition will at best cost a firm market share and at worst incur significant regulatory attention and intervention.

The FCA as lead regulator is making it clear that Friday December 31, 2021 (YE 2021) is the hard deadline for the end of LIBOR. Industry bodies (ISDA etc.) and working groups are currently finalising the new fallback and trigger provisions for each product to create a transition path away from IBOR. The current proposals differ significantly across products, countries, and timeframes and the transition from unified IBOR term rates to multiple differing solutions is creating many issues, some of which have yet to be identified due to the uncertainty involved.

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