LIBOR-backed securities currently being sold have poor fallback language that would apply if LIBOR ceases in 2021.
"'Until it’s clear what the alternative rates actually are and how they’ll be used, it’s hard for [investors] to begin making operational and investment changes,' says Eric Juzenas, director of the global regulatory solutions team at US-based Chatham Financial.
Juzenas believes it is too early for investors to make wholesale changes to portfolios. But he says individuals should familiarise themselves with proposed fallback provisions to understand whether the language offers suitable protection in the event that reference rates switch from Libor in future."
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