The coronavirus pandemic will make it harder for some firms to meet some of the milestones for transitioning away from Libor, the Financial Conduct Authority (FCA) said.
Libor, or the London Interbank Offered Rate, is an interest rate benchmark used in contracts worth around £355 trillion globally. The rate was widely discredited after banks were fined billions of dollars for trying to rig it, and the FCA has set an end of 2021 date for ending its use.
The regulator said today that its “central assumption that firms cannot rely on Libor being published after the end of 2021 has not changed and should remain the target date for all firms to meet”.
However it added that the coronavirus crisis has had “an impact on the timing of some aspects of the transition programmes of many firms” and was “likely to affect some of the interim transition milestones”.
Regulators and an industry working group had agreed that new loans should be priced with Sonia, an overnight interest rate compiled by the Bank of England, from the third quarter.
The aim is to minimise as far as possible loans being priced against Libor beyond the end of 2021. A similar milestone for swaps contracts passed this month.
“Alongside other international authorities, the Bank of England, FCA and Working Group will continue to monitor and assess the impact on transition timelines, and will update the market as soon as possible,” the FCA said.