Contributed By Hawkins Hatton Corporate Lawyers Ltd
The London Interbank Offered Rate (LIBOR) is to be replaced by the end of 2021 with “a more reliable alternative” according to the head of the Financial Conduct Authority (FCA), Andrew Bailey. Movement away from this deep-rooted mechanism is likely to cause disturbance to a broad range of individuals and companies around the world that base their finances on LIBOR. Current contacts may maintain LIBOR in the short term, whereas it seems new contacts will adopt Sterling Overnight Index Average (SONIA). Borrowers must start to consider the effects new benchmark rates could have on their property portfolios/investments to secure a smooth transition from LIBOR. The landscape is somewhat uncertain at this stage but as the deadline approaches borrowers will be better equipped to manage the risks.