Pub. 8 2020 Issue 4

ISSUE 4. 2020 5 the effort to a timely market transition by no longer issuing products linked to LIBOR and by modifying their legacy con- tracts linked to LIBOR wherever possible. Currently, the FSB Global Transition Roadmap states that firms should already have identified all existing LIBOR exposures, including what will happen after 2021, and should also determine if those contracts have any fallback measures in place. Further, those who provide customers with prod- ucts that reference LIBOR must plan to tell them about the transition and the steps being taken by the bank to move to alternative rates. Banks should now understand the industry and regulatory best practices with the transition away from LI- BOR, including necessary steps taken with legal counsel’s as- sistance. By mid-2021, banks should have already determined which legacy contracts can be amended before the end of the year and consummate those changes where parties can agree. New contracts should contain robust alternative reference rates wherever possible by this time. By the end of 2021, banks should be fully prepared for LI- BOR’s discontinuation. At this point, all new businesses should involve alternative rates or at the very least be capable of switching in a short amount of time. In cases where it was impossible to amend legacy contracts linked to LIBOR, the implications of the benchmark rate no longer being published should have already been discussed, with necessary steps being taken to prepare for this kind of outcome. By Dec. 31, 2021, the goal is for all market participants, financial and non-financial firms alike, to operate without relying on LIBOR. To meet this, the importance of a market-led transition will remain significant throughout this year. At the outset of LIBOR in 1986, no one could have predicted that over 30 years later, the rate would be discontinued and that a global pandemic would impact the transition. Just as 2020 was a significant year for the transition away from LI- BOR, 2021 is equally, if not even more critical. If banks have not taken the necessary steps to address their potential LIBOR exposure for new and existing products, they must immediate- ly put plans in place. The 1980s were indeed a different time compared to today. Just like computers with little storage space and phones as heavy as a sledgehammer, LIBOR is about to be an element left behind in the past. As we have adapted to technology changes, banks must also adapt to this change by properly preparing themselves and their customers. n Tim Dominguez, Associate General Counsel Tim Dominguez joins Compliance Alliance after graduating from the University of Houston Law Center. During law school, he worked as an intern within the legal department of Frost Bank in San Antonio, Texas. He also holds a Bachelor of Science in Communication Stud- ies from The University of Texas at Austin. Before law school, Tim worked various jobs within the Texas state government, including the Texas Senate and the Texas Legislative Council. As one of our hotline advisors, Tim provides guidance to C/A members on a wide variety of regulatory and compliance issues, in addition to writing articles for some of our publications. “We are so appreciative of Mountain West’s step-by-step support through this whole process. This is our first building, so we had a lot of questions about the process, but Mountain West was incredibly patient and supportive.” – Candice Christiansen, Namasté Center for Healing FINANCING YOUR AMERICAN DREAM As a small business, you have your own vision for the American Dream. Mountain West Small Business Finance can help you achieve it through an SBA 504 Loan. SBA 504 Loans • Purchase land and equipment • Buy, build, or remodel a building • Up to 25-year fixed rates • As little as 10% down For operating capital needs, talk to us about SBA Community Advantage (7a) Loans. 801.474.3232 | mwsbf.com Utah’s Small Business Lender # 1