The Financial Conduct Authority issued all chief executive officers related to asset management firms in the United Kingdom warnings on Thursday, February 27, 2020. This warning related to the LIBOR tax Benchmark Interest Rate, which is slated to terminate by the end of 2021s fiscal year. It means that the upcoming fiscal year with 2020 comes as a pivotal time for these financial firms.
The FCA officially remarked in their emailed letter: “We are writing to all UK regulated asset management firms as we wish to set out our expectations for your firm as it prepares for the end of LIBOR. We expect your firm to take all reasonable steps to ensure the end of LIBOR does not lead to markets being disrupted or harm to consumers, and to support industry initiatives to ensure a smooth transition.”
This UK Watchdog is demanding that these firms implement responsible financial strategies that’ll facilitate towards the orderly end of LIBOR Tax. Recommendations were provided to these Asset Management Firm CEOs, with the FCA suggested switching from the LIBOR Swap to the SONIA Swap. This will assist them with new positions throughout the 2021 fiscal year. This governing authority has also recommended that these asset management firms not investment into cash products and to implement transition plans. Following these recommendations will make the 2021 Fiscal Year considerably easier for these asset management firms.
- Collect all operational investments and activities relating to the LIBOR Tax.
- Implement programs that remove existing contracts with the LIBOR tax.
- Create a simple service that keeps clients aware of any potential changes.
The Financial Conduct Authority finished their remarks by stating: “It is essential that you reflect on the points raised in this letter and act as appropriate. LIBOR ending is a market event, and the transition to alternatives is market-led,” the regulator explained in the letter. We expect you to take proactive steps now where appropriate and not to wait for instructions from clients. Firms should not expect or base their transition plans on future regulatory relief or guidance or legislative solutions.”