The U.K. Financial Conduct Authority and Bank of England released a set of deadlines for phasing out the London interbank offered rate before its formal end on Dec. 31, 2021.
In a series of priorities published Thursday, the FCA and the central bank said cash-products issuance such as floating rate notes, syndicated loans and asset-backed securities linked to LIBOR should end by the third quarter of 2020. Users and issuers of derivatives should take steps to shift transaction trades from LIBOR to its U.K. replacement rate, sterling overnight index average, known as SONIA, by March 2 to help transition in 2020.
LIBOR is utilized by users of derivatives, loans and swaps, including pension funds, as a benchmark. Market participants are expected to reduce other LIBOR referencing contracts by the first quarter of 2021.
The bank and the FCA have written to major banks and insurers to set out our expectations for transition progress during 2020 and to reaffirm the support for the targets, said Christopher Woolard, executive director of strategy and competition at the FCA, in a news release.
"In most products, market participants have made impressive progress in moving away from LIBOR," Mr. Woolard said. "Firms must act now to help meet these targets and ensure a smooth transition to alternative rates" by the end of 2021.
In the U.S., LIBOR will be replaced by the secured overnight financing rate, or SOFR.
