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Topic: Benchmarks – IBOR transition

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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

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