Transition from LIBOR to Risk-Free Rates


Recently, our colleague Trevor Wood published a Client Alert titled LIBOR and the Transition to Risk-Free Rates, discussing the Chief Executive of the UK Financial Conduct Authority’s (FCA) recent announcement that, because of insufficient trading in the underlying markets, the London Interbank Offered Rate (LIBOR) will no longer be supported by the FCA after 2021. Take always from the Client Alert include:

  • Work continues on the transition to risk-free rates, but progress is slow—FCA has published timetable and milestones.
  • The London Loan Market Association (LMA) issued guidelines, but changes may not be readily accepted by market participants.
  • A “synthetic” or “zombie” LIBOR will likely continue to be published in order to deal with legacy transactions.