LIBOR Transition: Managing the Conduct and Compliance Risks | AFME

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LIBOR Transition: Managing the Conduct and Compliance Risks
18 Dec 2019

Since Andrew Bailey’s speech in 2017 banks have had to prepare for the reality that after 2021, the London Interbank Offered Rate (LIBOR) – one of the world’s most important reference rates - might cease to exist.

As part of industry preparation, regulatory authorities have been working with market participants to transition away from the use of LIBOR to risk-free rates; however, this transition also poses significant conduct risk.

The term “conduct risk” can be broadly defined to mean the risk that actions taken by a firm could be detrimental to a client or have an adverse effect on market stability or effective competition.

As a result, AFME and Simmons & Simmons have together highlighted questions which compliance teams should ask themselves concerning their LIBOR transition preparations in order to mitigate conduct risk.

Read the paper for all the details


  • Firms should review their structure and governance frameworks as this will define how they approach the transition and manage their relationships with external parties and key decision-makers.
  • Given the scale and complexity of the transition, firms should review their record-keeping processes to ensure they remain compliant when large volumes of documents are produced.
  • Review whether the organisation is suitably engaging with regulators and working groups so its responses to consultations are as informed as possible.
  • Firms should review whether their new risk-free-rate products are compliant under regulatory product governance obligations and access the viability of any new LIBOR-referencing instruments.
  • Determine whether communications teams are suitably addressing client needs and their varying levels of understanding of the transition.
  • Take steps to ensure outsourced services are compliant with regulation.
  • Ensure all business divisions are suitably trained and aware of the firm’s regulatory and legal obligations.
  • Review post-transition communications processes to determine if they are prepared for potential questions and complaints from clients regarding new risk-free-rate linked contracts.