LIBOR Transition Knowledge Center

When Will the Transition from LIBOR Occur?

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (FCA) announced that it will no longer require banks to submit quotes for LIBOR rates after 2021. The FCA also recommended that the market stop using LIBOR as a benchmark.

The global transition away from legacy short-term financing rates is a massive undertaking for the financial industry. Regulators, market participants, exchanges, and clearing functions all share a consistent set of priorities – the avoidance of market disruption, liquidity “gaps”, and the degradation legal or contractual terms.

While some market participants believe that the Covid-19 pandemic will delay the transition, postponement of LIBOR cessation seems unlikely. The Alternative Reference Rates Committee (ARRC) recognizes that near-term, interim steps may be delayed but continues to pursue its 2020 objectives. Segments of the market that remain reluctant to adopt in-arrears, SOFR-based instruments continue to advocate for alternative rates and an in-advance methodology (e.g., middle market corporate borrowers, consumer products). Certain market segments may receive extensions and relief. However, current expectations are that any delay will have a small impact and represent a small portion of contracts, collateral and assets.

Accordingly, the ARRC continues to expect that the financial system will complete the transition by the end of 2021. The current operating assumption remains “full speed ahead” toward 2021 cessation, contract remediation and pre-cessation trigger events.