New York’s financial regulator, the New York State Department of Financial Services (DFS), is taking action to ensure that firms are prepared for the transition from LIBOR to alternative benchmarks.
In a letter to financial institutions, insurers and pension funds, the DFS directed firms to submit plans to regulators for managing the risks relating to the replacement of LIBOR by Feb.7, 2020.
LIBOR, which is widely used to price loans, derivatives and securities transactions, is to be replaced by alternative rates at the end of 2021.
“Our financial institutions with LIBOR exposure need to prepare to manage the significant risks associated with its likely cessation, and be ready to transition to alternative reference rates,” New York’s superintendent Linda Lacewell said in a statement.
The DFS said that its action is intended to ensure that financial institutions’ boards of directors and senior management fully understand the risks associated with the potential cessation of LIBOR, have developed a plan to manage those risks and have started taking action to facilitate the transition to alternatives.