FCA extends deadline for ceasing to issue new loans based on LIBOR – what does this mean for lenders and borrowers?
In the wake of the coronavirus pandemic, the FCA has decided to extend its deadline for ceasing to issue new loans based on LIBOR until the end of Q1 2021. Banking & financial disputes Partner, Janine Alexander, comments on the implications.
“The FCA has confirmed that, due to the need to keep funds flowing freely and easily to SMEs by way of COVID-19 business interruption loans, it will extend its deadline for ceasing to issue new loans based on LIBOR to the end of Q1 2021 instead of this autumn. This additional breathing space is welcome news for lenders struggling to manage the two enormous operational tasks of both LIBOR transition and setting up the government backed loan scheme at the same time.
There is also considerable interplay between the two as lenders will need to decide the benchmark to use for loans in the scheme and reports indicate their preference is to continue to use LIBOR. However the FCA has reiterated that the overall deadline of end of 2021 for transition remains in place. In particular borrowers with loans extending beyond then should continue to assess their exposure by identifying relevant loans, considering the provisions within them and as necessary engaging with their bank early to resolve any positions where the situation will be commercially unacceptable based on the current drafting of loan agreement.”
Borrowers should be continuing to follow our guidance in relation to LIBOR transition and loans. Click here for information on how our team can support you in preparing your business.
30 April 2020