The London Interbank Offered Rate (LIBOR), used as the basis for interest rates all over the world for more than thirty years, will definitely be discontinued at the end of 2021. With an estimated USD 260 trillion in outstanding contracts for loans and other financial instruments tied to LIBOR benchmark rates (e.g. CHF LIBOR, EUR LIBOR, Euribor, GBP LIBOR and USD LIBOR), the implications are staggering. Massive disruption to business and the markets can only be avoided if companies manage their contracts intelligently to negotiate the transition from LIBOR interest rates. The new risk-free rates will affect all industries that use or have investments in interest rate linked products, and affect a comprehensive set of financial instruments including fixed-income securities, loans and mortages, and derivatives.
The transition to the rates replacing the existing interbank offered rates (IBOR) will require significant efforts by institutions to address the impact on business activities, client interactions, control processes, systems, risk management and financial performance. Organisations must begin now to prepare for and manage the transition.
PwC’s team in Switzerland and established global network of specialists deeply understands key LIBOR-impacted areas, such as:
We support you across the entire life cycle of the transition, beginning with mobilisation and governance, impact assessment, definition of remediation work streams, contract management and remediation, client outreach, systems & process changes, risk and valuation model changes, and managing related tax & accounting implications.
LIBOR reform: are you ready?
Numerous challenges will need to be addressed as the journey towards alternative benchmarks progresses. These challenges differ from industry to industry.
Impact on banks and financial services
LIBOR’s discontinuation is a paradigm shift in the financial industry, impacting banks' entire value chain from retail to treasury to trading. Market participants in financial services should adapt to upcoming changes at an early stage to be prepared and benefit from the new environment.
But LIBOR discontinuation impacts companies in all other industries as well. Given that the pricing of many financial instruments is tied to LIBOR, upcoming changes will have significant implications for corporate treasurers. To meet the deadline, treasurers need to do an evaluation and impact analysis, create a roadmap and timeline, assess the implementation costs and take the lead in areas such as contract management and documentation.
Partner, PwC Switzerland
Tel: +41 79 833 5140
Advisory Partner (Finance Risk and Regulatory Transformation), PwC Switzerland
Tel: +41 58 792 25 19
Assurance Director, PwC Switzerland
Tel: +41 58 792 2335
Director, PwC Legal Switzerland, PwC Switzerland
Tel: +41 58 792 28 86