On 17 May 2019, the International Swaps and Derivatives Association (ISDA) published two consultations on benchmark fallbacks – the first consultation covers adjustments that would apply to fallback rates in the event certain interbank offered rates (IBORs) are permanently discontinued, and the second consultation relates to pre-cessation issues for LIBOR and certain other IBORs.

Specifically, the:

  • first consultation sets out options for adjustments that will apply to the relevant risk-free rates (RFRs) if fallbacks are triggered for derivatives referencing US dollar LIBOR, Hong Kong’s HIBOR and Canada’s CDOR. Feedback is also sought on a proposed fallback for Singapore’s SOR following a permanent cessation of US dollar LIBOR, given US dollar LIBOR is currently used as an input to calculate the Singapore rate; and
  • second consultation relates to pre-cessation issues, and seeks comment on how derivatives contracts should address a regulatory announcement that LIBOR or certain other IBORs categorized as critical benchmarks under the EU Benchmarks Regulation are no longer representative of an underlying market.

Anything implemented as a consequence of the consultations would be in addition to the fallbacks ISDA expects to implement to address a permanent cessation of a key IBOR. The consultations follow a request by the Financial Stability Board’s Official Sector Steering Group for ISDA to request comment on the events that should trigger a move to a spread-adjusted fallback rate for LIBOR.

The deadline for responses to both consultations is 12 July 2019.