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With the critical financial benchmark, LIBOR, set to disappear by the end of 2021, banks should be ready to offer non-LIBOR-linked loans by the end of this year, the Financial Stability Board (FSB) says.

The global policy group published a paper that sets out a transition roadmap for financial firms to prepare for the end of LIBOR next year.

Regulators are moving to scrap the common interest rate benchmark in the wake of a major market manipulation scandal, and amid declining liquidity in interbank funding markets.

“The LIBOR benchmarks are not guaranteed to continue to be available after end-2021 and therefore preparations should be underway to reduce reliance on these rates well ahead of that point,” the FSB said, noting that this process will require commitment and effort by industry firms.

The FSB developed its roadmap in an effort to mitigate the transition risks that may arise as these critical benchmarks are eliminated.

The roadmap not only calls for firms to be prepared to offer non-LIBOR-based loans by the end of this year, but also to adopt plans for amending legacy contracts by mid-2021, and to have agreed on a transition plan for existing exposures before the end of next year.

“This roadmap sets out clear actions for financial firms and their clients to take in order to ensure a smooth LIBOR transition,” the FSB said.