APLMA-Bloomberg Poll Shows APAC Financial Institutions Still Aim to be On Track for LIBOR Transition Despite COVID-19

Hong Kong and Singapore – A poll jointly conducted by Asia Pacific Loan Market Association (APLMA) and Bloomberg among 170 corporate treasury, finance and legal executives in Asia Pacific suggests that more than half (60 percent) of market participants’ LIBOR transition plans have been impacted by the disruption caused by COVID-19. However, most still aim to be on track for the move to risk-free-rates (RFRs) by end-2021.

The poll was conducted via a virtual roundtable on July 8 where participants from Singapore, Hong Kong, Thailand, Australia and Malaysia convened to discuss loan market challenges and transition preparedness across APAC, the impact of COVID-19 on reform timelines, and infrastructure and tools needed to streamline the shift to RFRs.

The number of participants who have quantified their LIBOR exposures and are on track to begin executing their transition plan (36 percent) were on par with those who are only starting to put together a plan (36 percent). Twenty seven percent said that they have started executing their LIBOR transition plans.

“Bloomberg Intelligence data shows that Asia’s exposure is significant, with more than US$600 billion outstanding in USD-LIBOR-linked loans and bonds maturing from 2022. COVID-19 has impacted transition plans but we are encouraged to hear that the majority of market participants in the region are still aiming to be on track,” said Bing Li, Head of Asia Pacific, Bloomberg. “The transition is highly complex and together with APLMA and other industry associations, Bloomberg is committed to facilitating ongoing dialogue across multiple stakeholders to make this shift a smooth one.”

Andrew Ferguson, Chief Executive Officer, APLMA said, “In terms of ‘readiness’ in the loan space, there are some very real challenges ahead. We need consensus on calculation methodology and other conventions, and significant investment in operating systems. Only then can we really start transitioning new deals away from LIBOR and begin to address legacy contracts with post 2021 maturities. More pilot deals will definitely help but it would be helpful (and perhaps reassuring?) if regulators could become more involved, and even take the lead in guiding the way towards market consensus on some of the more difficult issues. The bottom line is that some market participants in the major APAC financial centres may be ready by the end of 2021 but for smaller borrowers and banks around the region there may be formidable problems.”

The survey results also showed:

• 44 percent of respondents believed the top challenge when facing an RFR world is agreeing on conventions, while almost 30 percent viewed availability and consistency of systems across vendor and institutions as the top challenge.
• Other respondents also indicated that they needed more consistency on methodologies to calculate compounded interest in arrears, followed by more guidance and information from local regulators, education and understanding of the impact of the transition and more information on amending legacy transactions.

On July 21, Bloomberg and the International Swaps and Derivatives Association, Inc. (ISDA) announced that it has begun calculating and publishing fallbacks ISDA intends to implement for certain key interbank offered rates (IBORs). Bloomberg is helping clients understand how their portfolios will be affected by the transition with a comprehensive suite of data, analytics, risk and portfolio solutions. Click here for more information.

To watch the replay of the webinar, please sign up here.

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About the Asia Pacific Loan Market Association

The APLMA is a professional not-for-profit trade association which represents the interests of institutions active in the syndicated loan markets in the Asia-Pacific (“APAC”) region. Its primary objective is to promote growth and liquidity in the syndicated loan markets (both primary and secondary), which it endeavours to do by: advocating best market standards and practices; promulgating a suite of highly professional standard documents; engaging with regulators on key matters affecting the markets; organising conferences and knowledge sharing events in member countries; and providing a professional networking platform for members across the region. Please visit our website (www.aplma.com) for detailed information.

About Bloomberg
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Media contacts:
Andrew Ferguson
APLMA
+852 2826 3500
andrew.ferguson@aplma.com

Grace Ngoh
Bloomberg Pte Ltd
+65 9088 7383
gngoh2@bloomberg.net