Risk managers: Is LIBOR in your sights?

  • Continued reliance on the London Interbank Offered Rate (LIBOR) after 31 December 2021 poses significant risks and disruptions to the stability and integrity of the financial system.
  • Companies themselves may also face financial and operational risks associated with inadequate preparation.

Risk managers: Is LIBOR in your sights?

ASIC has previously written to ASX100 companies on preparing for LIBOR transition. To further support industry, ASIC has provided additional guidance and recommendations on key LIBOR transition issues to ensure directors and corporate treasurers have the necessary information to achieve a successful transition.

ASIC, APRA and the RBA expect no new contracts to reference LIBOR by the end of 2021. All financial institutions have been asked to stop the sale and issuance of LIBOR-referenced contracts that expire after relevant cessation dates if they do not have robust fallback language and appropriate client communication.

From a risk-management perspective, the impact this may have on your company is that it must be operationally ready for alternative reference rates (ARRs) and ARR-related products by the end of 2021.

Being ‘operationally ready’ means your company needs to ensure systems and processes can accommodate financial contracts that reference ARRs. Systems may need to be updated and tested to support new ARR conventions.

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