COVID-19 and LIBOR Transition: Taking a Market-led Approach
Keeping LIBOR transition plans on track despite the COVID-19 pandemic
The impact of COVID-19 on financial services has been considerable, affecting different lines of business and functions. Likewise, the impact of COVID-19 on LIBOR has been significant, resulting in a great deal of volatility in the LIBOR market. However, regulators have reiterated the unavailability of LIBOR as a benchmark rate post 2021. This means that even as banks scramble to prevent service disruption, their LIBOR transition plans will need to continue on track. To minimize the COVID-19 impact on LIBOR transition, banks must review a few aspects that are intrinsically linked. These include:
- Analyzing changes to current LIBOR exposures per asset class
- Reassessing product inventory to understand the impact of COVID-19 volatility on performance
- Defining a systematic transition plan
- Establishing a robust rates strategy
The COVID-19 impact on LIBOR transition is largely stemming from market volatility and changes in the regulatory landscape. However, a systematic transition is key to financial stability and banks must take appropriate steps to ensure the same.