07 Jul 2020
In this briefing, we consider the implications of falling and potentially negative central bank rates for interest payment obligations that reference either LIBOR or the risk-free rates designed to replace it.
In an attempt to limit the economic fallout from the COVID-19 pandemic, central banks around the world have slashed bank rates to record lows. In the UK, the Bank of England Bank Rate sits at an all-time low of just 0.1%, amid speculation of further cuts.
At the same time, work continues on the transition from LIBOR. Certain interim milestones have been delayed as a result of COVID-19. However, a joint statement of the FCA, Bank of England and Working Group on Sterling Risk-Free Reference Rates made clear that firms must continue to work on the basis that LIBOR will not be published after the end of 2021.
This material is provided for general information only. It does not constitute legal or other professional advice.
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