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HKMA Survey on Reform of Interest Rate Benchmarks

In July 2020, the Hong Kong Monetary Authority (HKMA) released the latest results of a Survey on Reform of Interest Rate Benchmarks. As at the end of March 2020, 61% of authorised institutions (AIs) in Hong Kong had developed an institution-wide transition plan in preparation for the discontinuation of LIBOR next year.  85% of AIs responded that they had established a steering committee or appointed a senior executive to oversee the transition process. To enable a smooth and timely transition before the cessation of LIBOR at the end of 2021, the HKMA says that he expects AIs to adhere to the following transition milestones:


AIs should be in a position to offer products referencing the alternative reference rates (ARRs) to LIBOR from 1 January 2021;


adequate fallback provisions should be included in all newly issued LIBOR-linked contracts that will mature after 2021 from 1 January 2021; and


AIs should cease to issue new LIBOR-linked products that will mature after 2021 by 30 June 2021. 

Although the HKMA said that currently there is no intention to discontinue HIBOR, the HKMA and the Treasury Markets Association (TMA) are jointly evaluating the need for suitable fallback provisions for HIBOR contracts.

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