A New Standard: How Financial Institutions are Racing to Prepare for the LIBOR Transition

29 October 2019

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The race is on to replace the London Interbank Offered Rate (LIBOR), as just over two years remain before the deadline to institute a new reference rate for $200 trillion in dollar-denominated loans, bonds, and derivatives arrives. However, the processes by which financial institutions are navigating the transition remain largely hidden from view.

In order to shed light on the steps being taken by the financial industry to prepare for the shift away from LIBOR, SRS Acquiom commissioned Debtwire to survey executives of US-based investment banks, direct lenders, distressed debt investors, hedge funds, and business development companies to learn about their institutions’ preparations and the steps they have taken so far. The study highlights seven necessary steps the industry should take and provides an analysis of how much progress institutions have made on each of those steps.

Key findings include:

  • 64% of respondents plan a full transition away from LIBOR by the end of 2020, with a significant percentage planning this for the first half of the year.
  • Over a third of institutions (38%) have not begun the process of organizing a steering committee for the transition.
  • More than six in 10 institutions have responded to the uncertainty surrounding which benchmark will prevail in their segment of the financial markets by favoring the “amendment” approach in existing contracts, wherein the agent selects the successor rate subject to lender consent.