Publication | ThinkSet
The LIBOR Transition Continues, but Is Asia Ready?
Terence Mark and Paul Noring
Asian countries are behind the curve when it comes to selecting, preparing for and implementing new benchmarks in the LIBOR transition
The much-talked-about LIBOR transition—a move away from a key interest-rate benchmark that has been universally understood and accepted for decades—has been delayed, with the demise of some USD LIBOR rates pushed from the end of this year to mid-2023.
Many US banks welcomed the delay when it was announced in January, but other regions, notably Asia, are behind in terms of selecting, preparing for and implementing new benchmarks. The stakes are high, as LIBOR (the London Inter-Bank Offered Rate) is the underlying benchmark across five major currencies and underpins bonds, derivative contracts, loans and other financial products estimated at more than $300 trillion.
LIBOR is actually 35 separate interest-rate benchmarks across global markets, and the timing for phasing out those benchmarks, including those most widely used in USD, remains uncertain. In Asia, Japan (a LIBOR currency), Hong Kong and China are taking different approaches, with varying levels of success in transitioning to new a benchmark (or benchmarks) and implementing their use across a diverse range of financial products. Smaller markets such as Korea, Singapore and Taiwan are facing similar levels of uncertainty.
With so much on the line for global financial markets, we highlight the differences in preparation across Asia, with some context about how the US is preparing, what can—and should—happen for those markets to make a successful transition and risks inherent in further delays.
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