By Noline Matemera
FCA and PRA publish ‘Dear CEO’ letters on firms’ preparations for transition from LIBOR to risk-free rates
On 19 September the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) wrote to CEOs of major banks and insurers supervised in the UK asking for the preparations and actions they are taking to manage transition from the London Interbank Offered Rate (LIBOR) to alternative interest rate benchmarks. The purpose of the letters is to seek assurance that firms’ senior managers and boards understand the risks associated with this transition and are taking appropriate action now so that firms can transition to alternative rates ahead of the end of 2021.
Firms are required to provide a response to the letters by 14 December 2018 detailing:
- a board-approved summary of firms’ assessment of key risks relating to LIBOR discontinuation and details of actions that firms plan to take to mitigate those risks. Assessments and plans should consider an appropriately wide range of scenarios and impacts and include a quantification of LIBOR exposures; and
- the Senior Manager(s) within the firm who will oversee the provision of the firm’s response to the letter and the implementation of its transition plans.