Regulators are pushing hard for adoption of RFRs, but take-up remains slow. Issuers and investors continue to use LIBOR, partly to delay dealing with the mis-match between assets and liabilities that will result from a shift of benchmarks. A lack of clarity over exactly what happens to instruments that reference LIBOR once it ceases to exit and who will pick up the bill is also hampering the transition. While some issuers will consider the cost of consent solicitation justifiable, others are likely to resort to buying back bonds, according to RBC’s Sean Taor. The European Central Bank (ECB) has been working on plans to introduce an electronic version of Libor in order to reduce costs associated with clearing transactions at banks.
Regulators are pushing hard for adoption of RFRs, but take-up remains slow. Issuers and investors continue to use LIBOR, partly to delay dealing with the mis-match between assets and liabilities that will result from a shift of benchmarks. A lack of clarity over exactly what happens to instruments that reference LIBOR once it ceases to exit and who will pick up the bill is also hampering the transition. While some issuers will consider the cost of consent solicitation justifiable, others are likely to resort to buying back bonds, according to RBC’s Sean Taor. Those that do nothing run the biggest risk.