Libor in depth – Special report 2019

At the law firm Fieldfisher’s offices near London Bridge in June, around 75 people gathered in a meeting room for a seminar on Libor transition.

During the event, the audience of buy- and sell-side executives answered poll questions on their smartphones. The answers were not encouraging.

Asked: ‘How prepared are you for Libor discontinuance?’, two-thirds said they were just “starting to think about it”. None had begun moving Libor positions to new risk-free rates (RFRs).

This was a small sample size, and the results should be taken with a pinch of salt. But polls at other industry gatherings also give the impression that, despite clear warnings, Libor may disappear soon after 2021 – at which point the UK Financial Conduct Authority (FCA) will no longer compel banks to submit quotes to the various benchmark panels – market participants have done little about it, at least so far.

There are exceptions. Risk.net spoke with a number of forward-thinking firms in a range of sectors – corporates, asset managers, insurers, regional banks, clearing houses and supranational issuers – about the progress they have made in transitioning away from Libor, and the findings have been aggregated into a series of seven profiles published in this report.

BMO Global Asset Management is a liability-driven investment manager based in London, which, as of June, has moved nearly 95% of its £10 billion ($13 billion) sterling Libor swaps portfolio onto the sterling overnight interbank average rate (Sonia). The firm targets pockets of liquidity from asset swaps and unwinds, and all of its new sterling swap trades are linked to Sonia.

For other markets, progress has been a little slower. US insurer Prudential Financial is still testing the pipes with some SOFR swap trades, and getting accustomed to some of the technical differences inherent in the new products.

Included in the series is an interview with Cornelia Holthausen, deputy director-general in the directorate general market operations division of the European Central Bank, who speaks to Risk.net about transitioning from Eonia to the euro short-term rate, and how long Euribor can really hang around.

Download the full 2019 Libor in depth special report in PDF format

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