7.30.20
A new report by Fitch Ratings highlights several key risks that financial institutions could encounter as they prepare for the anticipated cessation of LIBOR and the potential impact on future credit ratings. Within the report, Fitch highlights that the three key categories of risks institutions will encounter upon a cessation of LIBOR are operational, litigation, and interest rate mismatch risks. Of these three, Fitch notes that operational and litigation risks could have the biggest impact on future credit ratings because of the LIBOR cessation’s dependence on regulatory and legislative solutions. They warn that “the absence of progress in regulatory actions or specific legislation” could lead Fitch to put some bonds on Negative Outlook in early 2021 and on Rating Watch Negative before 2022.