ASIC has released feedback on responses to the ‘Dear CEO’ letter from selected major Australian financial institutions, detailing their preparation for the end of London Interbank Offered Rate (LIBOR) – an initiative supported by the Australian Prudential Regulation Authority (APRA), and the Reserve Bank of Australia (RBA).
The feedback highlights the need for all institutions to plan for LIBOR transition, the aspects to consider in transition and the importance of addressing the related issues early. To ensure a smooth transition, it is crucial that institutions in Australia are well-prepared.
The regulators encourage all financial and corporate institutions in Australia to read the feedback, consider the implications of transition for their own situation, and plan accordingly for the end of LIBOR. The regulators recognise that disruptions from the COVID-19 outbreak may affect the timing of some aspects of institutions’ transition plans.
Institutions are also encouraged to communicate and highlight the potential impacts of LIBOR transition to their stakeholders, including end consumers, to raise awareness of the issues more broadly.
Institutions that responded to the letter have been separately provided with specific feedback from ASIC and APRA on their transition preparations.
RBA Assistant Governor (Financial Markets) Christopher Kent said, ‘Institutions using LIBOR need to act now to transition to more robust benchmarks in a timely way. Use of LIBOR beyond the end of 2021 poses significant reputational, operational and legal risks for institutions. It also risks disruptions to financial markets.’
ASIC Commissioner Cathie Armour said, ‘It is vital that Australian institutions are aware of any business practices or systems that depend on LIBOR and are taking appropriate actions ahead of the end of 2021. We encourage all market participants to assess the extent of their use of LIBOR and start their transition to alternative rates.’