FCA urges asset management firms to prepare for end of LIBOR

Maria Nikolova

Asset management firms should consider not making any new investments in GBP LIBOR based cash products maturing beyond 2021 by the end of the third quarter of 2020.

The UK Financial Conduct Authority (FCA) has earlier today sent a “Dear CEO” letter to asset management firms advising them to prepare now for the end of LIBOR.

The FCA and the Bank of England encourage market makers to change the market convention for sterling interest rate swaps from LIBOR to SONIA and have identified March 2, 2020 as an appropriate date for this change to happen. As asset management firms are users of swaps on behalf of clients, this target implies asset management firms should now consider switching from LIBOR swaps to SONIA swaps for new positions where possible, the FCA explains.

Further, one of the RFR Working Group’s priorities is to ‘Cease issuance of GBP LIBOR-based cash products maturing beyond 2021 by end Q3 2020.’ Asset management firms are significant investors on behalf of clients in cash products (such as bonds, securitisations, structured products, loans). Therefore, this target suggests asset management firms should consider not making any new investments in GBP LIBOR based cash products maturing beyond 2021 by the end of the third quarter of 2020.

Asset management firms also often operate funds and other products which have benchmarks or performance fees linked to LIBOR. Hence, the FCA thinks this target of end Q3 2020 is sensible for firms to consider when planning to cease launching new products with benchmarks or performance fees linked to LIBOR.

The FCA advises asset management firms to prepare a transition plan. The plan should:

  • carefully quantify all investments, operations and activities with LIBOR exposures and dependencies for a firm and its clients;
  • consider both how the firm will remove or ameliorate existing exposures and dependencies in a timely manner and avoid creating new ones, and
  • include a strategy for keeping clients appropriately informed of such changes as they are developed and implemented.

Read this next

Digital Assets

BlockDAG Presale Raises $9.9M as Batch 5 Nears Sell-Out Amid Bonk’s Fluctuating Trading Volume & Spell’s Bullish Price

Explore BONK’s trading volume, SPELL’s market shifts, and why BlockDAG’s 10,000 ROI makes it an ideal crypto for savvy investors in 2024.

Digital Assets

Cathie Wood’s sponsored Bitcoin ETF sees historic $200 million inflows

The ARK 21Shares Bitcoin ETF (ARKB), co-sponsored by Cathie Wood’s ARK Invest, registered historic inflows exceeding $200 million on Wednesday, signaling a robust appetite among investors for Bitcoin-centric investments.

Digital Assets

Sam Bankman-Fried might see his 25-year sentence halved

Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, was sentenced to 25 years in federal prison by a Manhattan court on Thursday. This comes after he was convicted of defrauding customers and investors, with Judge Lewis Kaplan highlighting the potential future risks posed by Bankman-Fried.

Technical Analysis

EURJPY Technical Analysis Report 28 March, 2024

EURJPY currency pair under the bearish pressure after the pair reversed down from the major resistance level 164.25, which also stopped the sharp weekly uptrend at the end of last year,

Digital Assets

BlockDAG’s Presale Hits $9.9M, MultiversX & MINA Price Predictions Show Green

Read about BlockDAG’s promising $10 prediction and insights on MultiversX Price Prediction as MINA’s potential unfolds.

Digital Assets

Rockstar Co-Founder and All-star Line Up Join Advisory Board to Take Metacade into Post Beta Orbit

Metacade, the revolutionary Web3 gaming platform, prepares to streak out of beta with a slew of ground-breaking initiatives that will redefine the way blockchain games are developed.

Retail FX

Prop firm The Funded Trader shuts down, claims relaunch in April

Prop trading firm The Funded Trader has ceased all operations, with claims for a relaunch in the near future.

Digital Assets

Ethereum-Based Tokenized Real Estate Platform USP Launches On Republic

How This Californian Startup Is Revolutionizing Real Estate Investment through Ethereum-Based Tokenization.

Digital Assets

Sui Spikes in Weekly DEX Volume, Joins Top 10 of All Blockchains

March DEX volume on Sui stands at over $2.88B – up more than 49% from February – with decentralized exchange Cetus and wholesale liquidity layer DeepBook leading.

<