LIBOR, the benchmark rate for which there is currently over $200 trillion in USD LIBOR outstanding exposure alone, will cease to be published after mid-2023, with the majority of tenors being discontinued by December 31, 2021. Our Team is focused on monitoring the ever-changing landscape and advising clients on the impact associated with LIBOR cessation.
The Federal Reserve recently issued guidance to examiners to evaluate banks’ LIBOR exit plans in the coming months. In particular, the Fed issued guidance for assessing institutions’ efforts regarding transition planning; financial exposure measurement and risk assessment; operational preparedness and controls; legal contract preparedness; communication; and oversight.
The UK FCA announced that all LIBOR tenors will either cease to be provided by any administrator or no longer be representative after December 31, 2021 for all sterling, euro, Swiss franc and Japanese yen LIBOR tenors.
New York Governor Andrew Cuomo recently proposed New York-specific legislation aimed at minimizing the legal and economic impact associated with the transition away from LIBOR. The proposed legislation provides for a statutory replacement benchmark rate for contracts that reference LIBOR and either lack fallback provisions or contain fallback provisions that have LIBOR-based benchmark replacements.
Recently, the administrator of LIBOR announced that it will solicit feedback from market participants early this month on its intention to cease the publication of two USD LIBOR settings after December 31, 2021 and the remaining USD LIBOR settings after June 30, 2023. As a result, the most commonly used USD LIBOR settings will likely be published well past the previously expected deadline of December 31, 2021. We discuss this and other recent regulatory and legislative developments impacting the LIBOR transition.
LIBOR IN CONVERSATION
Corporate partner Manuel Frey and litigation partner Jane O’Brien were featured on “The FinReg Pod,” a podcast series hosted by Professor Lee Reiners, executive director of the Global Financial Markets Center at Duke Law School.
Corporate partner Manuel Frey and litigation partner Jane O’Brien participated in a video interview with Regulatory Compliance Watch.
Our integrated team of derivatives, tax, securities and financing lawyers can work with investment advisors, public companies and other market participants to assess their LIBOR-related exposure, including developing transition plans for amending contracts and communicating appropriately with investors and other counterparties to LIBOR-linked contracts. Our LIBOR-focused litigation team can offer advice on evolving litigation and regulatory considerations and risk management related to transition preparedness.