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Topic: Benchmarks – IBOR transition

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The FCA and BoE encourage market participants in a switch to SONIA in the sterling non-linear derivatives market from 11 May 2021

On 29 March 2021, the FCA and the Bank of England (BoE) issued a joint statement supporting and encouraging liquidity providers in the sterling non-linear derivatives market to adopt new quoting conventions for inter-dealer trading based on SONIA instead of LIBOR from 11 May 2021. This is to facilitate a further shift in market liquidity … Continue Reading

Working Group on Sterling Risk-Free Reference Rates – minutes of meeting (23 February 2021)

On 25 March 2021, the Working Group on Sterling Risk-Free Reference Rates (Working Group) published the minutes from its virtual meeting held on 23 February 2021. Key points in the minutes include: PRA representatives indicated that supervisory oversight would intensify over the coming weeks and months, with an active meeting programme and monitoring in place … Continue Reading

BoE, FCA and the Working Group welcome the publication of the FMSB’s transparency draft of its market standard on use of Term SONIA reference rates

On 24 March 2021, the Working Group on Sterling Risk-Free Reference Rates, the FCA and the Bank of England (BoE) issued a joint statement welcoming the FICC Markets Standards Board’s (FSMB) publication of a proposed standard recognising the conduct and systemic risk advantages associated with a broad-based adoption of SONIA compounded in arrears and considering … Continue Reading

Targeted consultation on the designation of a statutory replacement rate for CHF LIBOR

On 23 March 2021, the European Commission issued a targeted consultation to assess the suitability of designating a statutory replacement for certain settings of Swiss Franc LIBOR (CHF LIBOR) to products such as savings accounts, mortgages and loans, including consumer credit agreements and small business loans, concluded prior to the entry into application of the … Continue Reading

Approach to reporting references to LIBOR in OTC derivative contracts under UK EMIR

On 11 March 2021, the FCA updated its UK EMIR News webpage by adding a new section covering the approach to reporting references to LIBOR in OTC derivatives contracts under EMIR. The FCA states that it expects modification messages to be reported for contracts when a fallback is triggered and applies. The FCA adds that … Continue Reading

Approach to reporting references to LIBOR in securities financing transactions under UK SFTR

On 5 March 2021, the FCA updated its webpage concerning UK SFTR news. Specifically, the webpage covers the approach to reporting references to LIBOR in securities financing transactions under the UK Securities Financing Transactions Regulation (UK SFTR). The webpage provides that: For UK SFTR reporting, it is essential that the UK SFTR transaction data accurately … Continue Reading

FCA Announcement on cessation of LIBOR and ISDA’s statement

Today, the FCA has confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and immediately after 30 June 2023, in the … Continue Reading

Working Group on Sterling Risk-Free Reference Rates – new papers

On 26 February 2021, the Working Group on Sterling Risk-Free Reference Rates published the following: Best practice guide for GBP loans. The Working Group has set a number of target milestones in relation to GBP LIBOR referencing loans ahead of the expected cessation of publication of GBP LIBOR after end 2021. A key recommendation is … Continue Reading

Working Group on Sterling Risk-Free Reference Rates paper – Path to ending new use of GBP LIBOR-linked derivatives

On 24 February 2021, the Working Group on Sterling Risk-Free Reference Rates published a paper to support market participants in meeting its upcoming recommended milestones for ending new use of GBP LIBOR in derivatives. The first of these is to cease initiation of new GBP LIBOR-linked linear derivatives by the end of March 2021, except … Continue Reading

Transition in sterling non-linear derivatives referencing GBP LIBOR ICE Swap Rate

On 16 February 2021, the Working Group on Sterling Risk-Free Reference Rates published a paper, ‘Supporting transition in sterling non-linear derivatives referencing GBP LIBOR ICE Swap Rate’. The purpose of the paper is to document how the Non-Linear Derivatives Task Force (NLTF) has been considering the use of SONIA swap rates to develop a potential … Continue Reading

HM Treasury consultation – Supporting the wind-down of critical benchmarks

On 15 February 2021, HM Treasury issued a consultation ‘Supporting the wind-down of critical benchmarks’. The Financial Services Bill (FS Bill) amends the onshored Benchmarks Regulation (BMR) so that the FCA may manage a situation in which a critical benchmark has become or is at risk of becoming unrepresentative and it may be impractical or … Continue Reading

UK Finance report – guide for banks and lenders on discontinuation of LIBOR

On 12 February 2021, UK Finance issued a report Discontinuation of LIBOR – Guide for banks and lenders. The purpose of the report is to help UK Finance members understand where the LIBOR transition process has got to, and identify the actions they need to take now to ensure they are ready to meet the … Continue Reading

Published in OJ – Regulation amending BMR to address benchmark cessation risks and exempt certain third-country FX benchmarks

On 12 February 2021, there was published in the Official Journal of the EU (OJ) Regulation (EU) 2021/168 amending Regulation (EU) 2016/1011 as regards the exemption of certain third-country spot foreign exchange benchmarks and the designation of replacements for certain benchmarks in cessation, and amending Regulation (EU) No 648/2012. Publication in the OJ follows agreement … Continue Reading

Consultation on successor rate to GBP LIBOR in legacy bonds referencing GBP LIBOR

On 11 February 2021, the Working Group on Sterling Risk-Free Reference Rates issued a consultation paper on a successor rate to GBP LIBOR in legacy bonds referencing GBP LIBOR. The consultation paper is addressed to bond market participants who are considering the operation of fallbacks in their contracts which will be triggered in the event … Continue Reading

Investors call on companies to take urgent action and transition their LIBOR-linked bonds

On 3 February 2021, the Investment Association (IA) issued a letter to CEOs / CFOs of companies issuing LIBOR-linked sterling bonds warning of the risk of significant market disruption and harm to investors if bonds continue to reference a non-representative rate after the 31 December 2021 transition deadline. The IA notes that there remains a … Continue Reading

ISDA – IBOR fallbacks take effect for derivatives

On 25 January 2021, the ISDA announced that new fallbacks for derivatives linked to key interbank offered rates have come into effect. The fallbacks, published by the ISDA, will be incorporated into all new derivatives contracts that reference ISDA’s standard interest rate derivatives definitions. They will also be included in legacy non-cleared derivatives if the … Continue Reading

Regulation amending BMR to address benchmark cessation risks and exempt certain third-country FX benchmarks

On 22 January 2021, the Council of the EU published the text of the proposed Regulation amending the Benchmarks Regulation to address benchmark cessation risks and exempt certain third-country FX benchmarks. The Council also published an ‘I’ item note on the draft Regulation inviting the Permanent Representatives Committee to decide that the Council may use … Continue Reading

New FCA and PRA webpages – The final countdown – Completing sterling LIBOR transition by end-2021

On 11 January 2021, the FCA issued a new webpage The final countdown: Completing sterling LIBOR transition by end-2021. On the webpage the FCA warns firms that 2021 is the critical year for firms to complete their transition away from LIBOR. The LIBOR administrator, ICE Benchmark Administration, is consulting on ceasing publication of all sterling … Continue Reading

ICE Benchmark Administration Launches ICE Term SONIA Reference Rates as a Benchmark for Use in Financial Instruments

On 11 January 2021, ICE Benchmark Administration announced the launch of its ICE Term SONIA Reference Rates (ICE TSRR) as a benchmark for use in financial instruments by licensees. The ICE TSRR are designed to measure expected (i.e. forward-looking) SONIA rates over one, three, six and 12 month tenor periods, and are based on a … Continue Reading

Credit adjustment spread methods for active transition of GBP LIBOR referencing loans – December 2020

On 18 December 2020, the Working Group on Sterling Risk-Free Reference Rates published a paper designed to support loan market participants in considering credit adjustment spreads for active transition. The paper facilitates consideration of the key methodologies emerging in the loan market, and how these compare to the approaches taken in the bond and derivatives … Continue Reading

Bowing out gracefully: LIBOR’s retirement draws near

On 9 December 2020, the Bank of England (BoE) published a speech from Andrew Hauser (Executive Director, Markets) entitled Bowing out gracefully: LIBOR’s retirement draws near. In his speech Mr Hauser discusses the following key things that market participants need to get done: Move all new business off LIBOR as soon as possible next year … Continue Reading

The EU prepares for the end of LIBOR: the Commission welcomes the agreement reached between the European Parliament and the Council on financial benchmarks

On 1 December 2020, the European Commission issued a statement welcoming the agreement reached by the European Parliament and the Council on amendments to the Benchmark Regulation. The agreed amendments to the Benchmark Regulation will empower the Commission to designate a replacement benchmark that covers all references to a widely used reference rate that is … Continue Reading
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