Oliver Wyman has published a report on the transition from LIBOR outlining why the speed of change must accelerate and detailing actions required by banks and regulators. The report argues that, while banks with large LIBOR-based exposure have used the time since the FCA’s announcement in 2021 to develop transition plans and begin the shift to RFRs, additional risks and complexities have emerged. It claims smaller banks with less exposure appear to be planning to rely predominantly on the existing fallback clauses in contracts—an approach regulators have explicitly advised against. The report states activity needs to shift from fallbacks to new product development and transition, and that this requires action by both market participants and regulators to avoid a major market disruption.
Oliver Wyman has published a report on the transition from LIBOR outlining why the speed of change must accelerate and detailing actions required by banks and regulators. The report argues that, while banks with large LIBOR-based exposure have used the time since the FCA’s announcement in 2017 to develop transition plans and begin the shift to RFRs, additional risks and complexities have emerged. It claims smaller banks with less exposure appear to be planning to rely predominantly on the existing fallback clauses in contracts—an approach regulators have explicitly advised against. The report states activity needs to shift from fallbacks to new product development and transition, and that this requires action by both market participants and regulators to avoid a major market disruption.