“Active transition” of securitisations that refer to the soon-obsolete LIBOR interest rate benchmark must be pursued by all market participants in immediate joint effort. This is the message from European financial industry association AFME, in a call-to-action letter.
It is now less than twelve months remaining, until the continuation of panel-based LIBOR can no longer be guaranteed, AFME stresses in its statement published Wednesday. It is authored by the organization’s head of fixed income Richard Hopkin.
“In view of the potential deterioration in liquidity in LIBOR-based instruments and other financial and non-financial risks associated with inaction, including the loss of control over economic terms, if there is any solution for such transactions that enables active transition to the relevant risk-free rate to be effected then AFME urges that that solution should be considered as a matter of urgency in line with the FCA’s expectation that market participants should effect a material reduction in the stock of outstanding LIBOR-based FRNs by the end of Q1 2021,” he writes.