Recent developments demonstrate that climate change-related activism is no longer primarily the domain of ‘retail’ activist groups and that there has been a noticeable increase in institutional shareholder support for ESG-related activism, where directors may be targeted.
Companies may face financial and operational risks if they continue to rely on LIBOR. ASIC has previously written to ASX100 companies on preparing for LIBOR transition.
In support of the industry, ASIC has provided further guidance and recommendations on key LIBOR transition issues to ensure directors and corporate treasurers have the necessary information to achieve a successful transition.
Be operationally ready
ASIC has communicated to all financial institutions that they should stop the sale and issuance of LIBOR-referenced contracts that expire after relevant cessation dates if they do not have robust fallback language and appropriate client communication.
The impact this has on companies is that they need to be operationally ready for alternative reference rates (ARRs) and their related products by the end of 2021.
Being operationally ready means that companies need to ensure systems and processes can accommodate financial contracts that reference ARRs. Systems may need to be updated and tested to support new conventions.
Act now: Engage with your bank and financial service provider
ASIC strongly urges companies to conduct a LIBOR ‘stocktake’ and identify all areas of your organisation that are affected by LIBOR. If you have large exposures, your company may have already started the transition process. If not, you need to engage with your banks and financial services providers to actively transition to ARRs recommended by the relevant the LIBOR transition working groups.
Many regulators and working groups for key LIBOR jurisdictions have set milestones and timelines to support a smooth transition. We recommend that companies review these milestones and consider the implications on their business (see links below).
To assist the industry, ASIC will continue to provide guidance and clarification for firms that may face difficulties in dealing with the scope of LIBOR transition.
- Guidance and recommendations for directors and corporate treasurers.
- Letter to ASX100 companies on preparation for LIBOR transition.
- ASIC, APRA and RPA joint media release: Regulators expect Australian institutions to cease the use of LIBOR in new contracts before the end of 2021.
- Updated Global Transition Roadmap for LIBOR, incorporating the confirmed LIBOR cessation dates and transition milestones set across the different LIBOR jurisdictions.
- Statement encouraging the adoption of overnight risk-free rates (RFR) where appropriate, while recognising the role for use of forward-looking RFR term rates in some limited cases.
- Statement supporting the use of the ISDA spread adjustments in cash products.
Already a member?
Login to view this content