Conduct risk during LIBOR transition: Questions and answers

Nov 19th '19

LIBOR will end after 2021. The Financial Conduct Authority (FCA) expect firms to take appropriate steps to ensure they can transition to alternative rates ahead of end-2021.

During discussions with industry, including the Working Group on Sterling Risk-Free Rates (RFR Working Group), firms have asked about FCA core expectations of firms during the transition away from LIBOR. In response, they have answered key questions on conduct risk arising from LIBOR transition, outlining expectation that:

  • firms have a strategy in place and take necessary action during LIBOR transition
  • customers are treated fairly by following FCA rules and guidance

FCA supervision of firms’ transition away from LIBOR is focused on firms effectively managing the risks arising from transition, including prudential, operational and conduct risks.

The Authority encourages all firms that currently rely on LIBOR to read and consider these questions and answers. They are not exhaustive. They do apply to firms across various sectors. The FCA has used sector-specific examples where relevant but firms will need to exercise judgement on the impact of LIBOR transition across their business, taking the interests of specific clients and the nature of the firm’s business model into account.

The FCA welcome feedback from firms across all sectors as we consider how best to support firms during this process.

Source: FCA