By Jacqueline Cook, Senior Knowledge Development Lawyer
The end of March has welcomed Spring, and this year it marks a new era for the financial markets, particularly for loans and financial products which would usually use Sterling LIBOR as the benchmark for calculation of interest, default interest or to calculate a discount rate. After 31 March 2021, alternative rates or benchmarks should be used in place of Sterling LIBOR.
More than twelve years after the dramatic fall of Lehman Brothers and the ensuing credit crisis [1], the Financial Conduct Authority recommends that there should be no new loans and financial products issued using Sterling LIBOR after the end of Q1 2021 which would last beyond 31 December 2021.
"It is now vital that all businesses take action to ensure they are ready to meet the next major industry milestone – to cease use of GBP LIBOR in new loans, bonds, securitisations and linear derivatives that expire after the end of 2021, by 31 March 2021” (The Working Group on Sterling Risk-Free Reference Rates[2] March 2021).
There are a number of alternative rates available to replace Sterling LIBOR:
Read the full Client Alert here.