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Topic: Benchmarks – IBOR transition

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FCA speech: LIBOR transition – the critical tasks ahead of us in the second half of 2020

On 3 August 2020, the FCA published a speech by Edwin Schooling Latter (Director Markets and Wholesale Policy, FCA) on ‘LIBOR transition – the critical tasks ahead of us in the second half of 2020’. Key points in the speech include: The 4 to 6 months ahead are arguably the most critical period in the … Continue Reading

ECB consultation on the publication by the ECB of compounded term rates using the €STR

On 24 July 2020, the European Central Bank (ECB) issued a public consultation on the publication by it of compounded term rates using the euro short-term rate (€STR). The motivation behind the consultation is that the ECB is to provide benchmark users with compounded values of the €STR for selected maturities. These values will be … Continue Reading

ECB publishes good practices for banks to prepare for benchmark rate reforms

On 23 July 2020, the European Central Bank (ECB) published the results of its industry-wide assessment of banks’ preparedness for the benchmark interest rate reforms. While banks are generally well aware of the complexity of the reforms and the challenges involved, their level of preparation leaves room for improvement, according to the survey. Banks are … Continue Reading

PRA statement on Libor transition and PRA resolution-related rules

On 7 July 2020, the PRA issued a statement referring to the letter from Sam Woods concerning the prudential regulatory framework and Libor transition. In the statement the PRA states that it considers that, where the sole purpose of an amendment to a liability (as defined in the Contractual Recognition of Bail-In Part of the … Continue Reading

FSB statement on the impact of COVID-19 on global benchmark reform

On 1 July 2020, the Financial Stability Board (FSB) issued a statement concerning the impact of the COVID-19 pandemic on global benchmark transition. The statement notes that it is likely that some firms’ transition plans are likely to be temporarily disrupted or delayed, whilst others are continuing. The FSB maintains its view that financial and … Continue Reading

Planned amendments to the Benchmarks Regulation

On 23 June 2020, a written statement by the Chancellor of the Exchequer, Rishi Sunak, on financial services regulation explaining that the Government intends to legislate to amend and strengthen its existing regulatory framework for critical benchmarks such as LIBOR rather than directly imposing legal changes on LIBOR referencing contracts that are governed by UK … Continue Reading

FMSB publishes a Spotlight Review on navigating conduct risks in LIBOR transition

On 11 June 2020, the FICC Markets Standards Board (FMSB) published a Spotlight Review on LIBOR transition with practical case studies to support firms when considering the risks to fairness and effectiveness as the market moves to risk-free rates as more sustainable and representative benchmarks. As the risks associated with the continued provision of new … Continue Reading

RFRWG paper on the identification of tough legacy issues

On 29 May 2020, the Bank of England updated its web page concerning the transition to sterling risk-free rates from LIBOR by adding a paper from the Working Group on Sterling Risk-Free Reference Rates (RFRWG) on the identification of tough legacy issues. Tough legacy contracts are considered to be those that do not have robust … Continue Reading

Loan Market Association (LMA) publishes list of loans referencing risk-free rates

On 20 May 2020, the LMA published on its website a list of loans in the market which reference risk-free rates (RFRs).  The LMA states that over the last year, bilateral and syndicated loans have been announced which reference the sterling (SONIA), US dollar (SOFR) and Swiss franc (SARON) RFRs, demonstrating an appetite among some … Continue Reading

ISDA issues report regarding LIBOR fallback

The International Swaps and Derivatives Association (ISDA) has published a report summarising the final responses to its consultation process regarding including LIBOR pre-cessation fallbacks in derivatives that reference LIBOR. The results of the consultation indicate that a significant majority of respondents support including pre-cessation and permanent cessation fallbacks without optionality or flexibility in the amended … Continue Reading

BoE market notice on its approach to collateral referencing LIBOR for use in the Sterling Monetary Framework

On 7 May 2020, the Bank of England (BoE) published a market notice in relation to its approach to collateral referencing LIBOR for use in the Sterling Monetary Framework (May notice). In a previous market notice, issued on 26 February 2020, the BoE had announced that, from October 2020, it would increase haircuts progressively on … Continue Reading

The Prudential Regulation Authority publish statement on on prioritisation in light of Covid-19

The Prudential Regulation Authority (PRA) has published a statement today on the prioritisation of its work in light of the COVID-19 pandemic. The statement sets out further details of the Prudential Regulation Authority’s plans to help firms maintain their safety and soundness and deliver the critical functions they provide to the economy. Accordingly, the statement … Continue Reading

ISDA publishes Interest Rate Benchmarks Review: First Quarter of 2020

On 22 April 2020, the International Swaps and Derivatives Association (ISDA) published its Interest Rates Benchmarks Review for the first quarter of 2020. The ISDA Interest Rate Benchmarks Review analyses the trading volumes of interest rate derivatives (IRD) transactions in the US referencing the Secured Overnight Financing Rate (SOFR) and other selected alternative RFRs, including … Continue Reading

Further statement from the RFRWG on the impact of Coronavirus on the timeline for firms’ LIBOR transition plans

On 29 April 2020, the FCA issued a further statement on LIBOR reform referring to the joint statement that was made on 25 March that it remains the central assumption that firms cannot rely on LIBOR being published after the end of 2021. The FCA states that it recognises the challenges presented by the current … Continue Reading

ISDA and Bloomberg publish IBOR Fallback Rate Adjustments Rule Book

On 23 April 2020, the International Swaps and Derivatives Association, Inc. (ISDA) and Bloomberg Index Services Limited (BISL) published an IBOR Fallback Rate Adjustments Rule Book, which sets out the methodology, rules and conventions that BISL will implement to calculate rate adjustments in derivative contracts in relation to the transition from inter-bank offered rates (IBORs) … Continue Reading

ISDA announces preliminary results of second consultation on pre-cessation fallbacks

On 16 April 2019, ISDA announced the preliminary results of its consultation on the implementation of pre-cessation fallbacks for derivatives referencing LIBOR. The consultation, commenced in February 2020, invited feedback from market participants on whether a pre-cessation trigger should be included in ISDA standard documents in addition to the permanent cessation fallbacks that ISDA is … Continue Reading

International Accounting Standards Board consults on interest rate benchmark reform changes

The International Accounting Standards Board  (IASB) has announced a consultation on proposed amendments to the International Financial Reporting Standards (IFRS) Standards to assist companies in providing useful information to investors about the effects of interest rate benchmark reform on financial statements. The IASB has split its work on interest rate benchmark reform on financial reporting … Continue Reading

Bank of England consultation on credit adjustment spread methodologies for fallbacks in cash products referencing GBP LIBOR – Summary of responses

The Working Group on Sterling Risk-Free Reference Rates (Working Group) has published a consultation paper for the sterling cash market (including loans, bonds, and securitisations) considering four methodologies that could be used to calculate the credit adjustment spread for fallbacks from GBP LIBOR to SONIA in cash products maturing beyond the end of 2021. The … Continue Reading

Working Group on Euro Risk-free Rates’ factsheets on EONIA to €STR transition and EURIBOR fallbacks

The European Central Banks’s working group on euro risk-free rates has published a factsheet on EONIA to €STR transition and a factsheet on understanding EURIBOR fallbacks. The EONIA to €STR transition factsheet provides background information on why the transition is happening, a timeline and some of the key issues arising from the transition, which include: … Continue Reading

LIBOR Transition – Bank of England announces intention to publish a daily SONIA Compounded Index

Introduction On 26 February 2020, the Bank of England published a discussion paper Supporting Risk-Free Rate transition through the provisions of compounded SONIA, February 2020 (the Discussion Paper) which requested views from sterling market participants in relation to: the Bank of England’s intention to publish a daily SONIA Compounded Index; and the usefulness of the … Continue Reading

ECB working group on euro risk-free rates seeks feedback on Swaptions impacted by transition from EONIA to the €STR

On 13 March 2020, the European Central Bank (ECB) working group on euro risk-free rates launched a public consultation on whether to issue recommendations to address specific issues for swaption products as a result of the proposed transition from EONIA to the euro short-term rate (€STR). The central counterparty (CCP) discounting switch from EONIA to … Continue Reading
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