Managing Conduct Risks in LIBOR Transition – FCA guidance
On the 19 November, the FCA published clear expectations and guidance for firms on managing the prudential, operational and conduct risks arising from the transition away from LIBOR. The scale and the complexity of the transition process have become apparent to both industry and the regulators as the end of 2021 deadline becomes nearer. This guidance is a critical building block for firms in defining their transition plans, timelines and paths. Speeches by the FCA underline how the regulators expect firms to be planning to move swiftly to reduce exposure and reliance on LIBOR and not to be waiting for all issues to be resolved.
The FCA’s overarching expectation is that:
The FCA states that for many firms, LIBOR transition will impact their overall business strategy and front-office client engagement, and should not just be seen as ‘a narrow legal and compliance risk’. Emphasising firms’ existing obligations, the FCA says that firms must have effective processes and controls to identify, manage, monitor and report risks to their business, including risks associated with critical outsourced functions and conflicts of interest.
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