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Topic: Benchmarks – IBOR transition

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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

FCA response to IBA’s proposed consultation on intention to cease US$ LIBOR

On 30 November 2020, ICE Benchmark Administration (IBA), the FCA-regulated and authorised administrator of LIBOR, announced that it will consult in early December on its intention to cease US$ LIBOR. IBA intends that, subject to confirmation following its consultation, one week and two month US$ LIBOR settings will cease at end-2021, and that the US$ … Continue Reading

ECB working group on euro risk-free rates launches two public consultations on fallbacks to EURIBOR

On 23 November 2020, the European Central Bank’s working group on euro risk-free rates launched the following consultations on fallbacks to EURIBOR: Consultation on EURIBOR fallback trigger events. In this consultation paper, the working group identifies and provides recommendations on a generic set of potential permanent EURIBOR fallback trigger events that market participants could consider … Continue Reading

FSB sets out progress on interest rate benchmark reform

On 20 November 2020, the Financial Stability Board (FSB) published a progress report on implementation of reforms to major interest rate benchmarks. Among other things the report notes: Production of LIBOR cannot be guaranteed after the end of 2021. The administrator of LIBOR, ICE Benchmark Administration, has recently announced that it will consult on its … Continue Reading

Benchmarks Regulation: our proposed new powers, policy and decision-making

On 18 November 2020, the FCA published a new web page setting out its thinking on the considerations it will take into account when exercising its powers, as proposed under the Financial Services Bill (FS Bill), to ‘designate’ a critical benchmark and to impose changes to that benchmark. The FCA is asking for views on … Continue Reading

ICE Benchmark Administration to consult on its intention to cease the publication of GBP, EUR, CHF and JPY LIBOR

On 18 November 2020, ICE Benchmark Administration (IBA), the FCA-regulated and authorised administrator of LIBOR, announced that it will consult on its intention that the euro, sterling, Swiss franc and yen LIBOR panels would, subject to confirmation following IBA’s consultation, cease at end-2021. The FCA has also issued a statement concerning the IBA consultation setting … Continue Reading

Best practice guidance – transition from LIBOR for SME customers

On 28 October 2020, UK Finance and the Lending Standards Board launched a report covering ‘Best Practice Guidance in Transition from LIBOR for SME customers’. The objectives of the report are to support the transition from LIBOR to alternative reference rates, champion good outcomes for business customers, and collectively promote good practice throughout the process. … Continue Reading

HMT Policy Paper – Amendments to the Benchmarks Regulation to support LIBOR transition

On 21 October 2020, HM Treasury published a Policy Paper ‘Amendments to the Benchmarks Regulation to support LIBOR transition’. The Policy Paper refers to the Financial Services Bill (Bill) that the UK Government has brought forward which, among other things, amends the Benchmarks Regulation, providing an overarching legal framework which gives the FCA new and … Continue Reading

FSB publishes global transition roadmap for LIBOR

On 16 October 2020, the Financial Stability Board (FSB) published a global transition roadmap for LIBOR. The roadmap sets out a timetable of actions for financial and non-financial sector firms to take in order to ensure a smooth LIBOR transition by end-2021. The roadmap provides that: By the end of 2020, at a minimum: Lenders … Continue Reading

ISDA Board Statement on the IBOR Fallbacks Supplement and Protocol

On 9 October 2020, the ISDA issued a board statement on the IBOR Fallbacks Supplement and Protocol. The statement reads as follows: On October 1, 2020, ISDA received a business review letter from the US Department of Justice (DoJ) regarding the new fallbacks it plans to implement in its standard documentation for derivatives. The letter … Continue Reading

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

On 6 October 2020, the Financial Markets Law Committee (FMLC) published its response to the European Commission’s proposed Regulation amending the Benchmarks Regulation as regards the exemption of certain third-country foreign exchange (FX) benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation. The FMLC draws attention to certain issues of uncertainty in … Continue Reading

FCA and BoE encourage market participants in further switch to SONIA in interest rate swap markets

On 28 September 2020, the Bank of England (BoE) announced that both it and the FCA support and encourage liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA instead of LIBOR from 27 October 2020. The intention is to facilitate the further shift in market liquidity toward … Continue Reading

2021: A defining moment for the interest rates reform

On 21 September 2020, the European Securities and Markets Authority (ESMA) published a speech by its chair, Steven Maijoor, entitled 2021: A defining moment for the interest rates reform. In his speech Mr Maijoor discusses recent and expected developments of the global interest rates reform and the crucial role that the cooperation between public authorities … Continue Reading

UK Finance – Discontinuation of LIBOR: a guide for business customers

On 16 September 2020, UK Finance published a guide which is intended for business customers with LIBOR-linked loans to help them understand: The anticipated discontinuation of the benchmark rate LIBOR. Why LIBOR is being discontinued. What they should expect to hear from their bank or lender in the coming months.  … Continue Reading

LMA exposure draft of multicurrency facility agreement including provisions for LIBOR switch to Risk-Free Reference Rates

On 11th September the Loan Market Association published an exposure draft multicurrency term and revolving facilities agreement incorporating rate switch provisions (the Rate Switch Agreement). The draft is for the purposes of switching from an initial IBOR forward looking term rate referenced Loan in any currency determined by reference to an existing forward looking term … Continue Reading

Working Group’s recommendations on conventions for referencing compounded in arrears SONIA

On 1 September 2020, the Working Group on Sterling Risk-Free Reference Rates published a statement outlining recommendations on conventions to support the use of Sterling Overnight Index Average (SONIA) in loan markets for Sterling Bilateral and Syndicated Facilities, including Multicurrency Syndicated Facilities where there is a sterling currency option. The recommendations are intended to support … Continue Reading

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
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