Welcome to the latest issue of Mayer Brown's IBOR Transition Digest-a periodic compendium of global regulatory and market developments and insights on the complex issues confronting financial market participants as they plan to transition from LIBOR and its variants to replacement benchmark interest rates. As attention to IBORtransition accelerates and becomes more focused, it is critical to have access to comprehensive and timely resources about the market.
For additional resources and an introduction to our global cross-practice IBOR Transition Task Force, please visit Mayer Brown's IBOR Transition portal.
NEWS AND DEVELOPMENTS
United States - Derivatives
Amended Recommendations for Swaptions
Impacted by the CCP Discounting Transition to
SOFR
ARRC, 11 September 2020
The amended recommendation states that, if counterparties cannot
reach an agreement on the exchange of compensation before October
16, 2020, "then the counterparties should amend their legacy
swaptions to bring them into scope for ISDA's Supplement 64 and
specify an Agreed Discount Rate consistent with the swaptions'
existing contractual terms."
United States - General
RFP for Vendor to Publish Forward-Looking
SOFR Term Rates
ARRC, 10 September 2020
Seeking to identify a recommended administrator who will be
responsible for the calculation and publication of forward-looking
SOFR term rates to be published in the first half of 2021 if
liquidity in SOFR derivatives markets has developed sufficiently,
and also to establish recommended scopes of use for such term
rates.
United Kingdom - Loans
Recommendation of Credit Adjustment Spread
Methodology for fallbacks in cash market products referencing GBP
LIBOR
Bank of England Working Group on Sterling Risk-Free
Reference Rates, 10 September 2020
In light of the responses to the December 2019 consultation on
credit adjustment spread methodologies, the Working Group
recommends the use of the historical five-year median spread
adjustment methodology when calculating the credit adjustment
spread, which should then be applied to any relevant Sterling
Overnight Index Average rate chosen or recommended to replace GBP
LIBOR pursuant to contractual fallback and replacement of screen
rate provisions following a permanent cessation or pre-cessation
trigger in relation to GBP LIBOR.
Securing a SONIA-based sterling loan
market
Bank of England Working Group on Sterling Risk-Free
Reference Rates, 10 September 2020
A statement from the Sterling Working Group recommending that
lenders (a) be ready by the end of September 2020 to offer
non-LIBOR linked products to their customers; and include clear
contractual arrangements to facilitate conversion of all new or
refinanced LIBOR-linked products to SONIA or other alternatives and
(b) by the end of March 2021, cease new issuance of all sterling
LIBOR-linked loan products expiring after the end of 2021.
Active Transition of GBP LIBOR-Referencing
Loans
Bank of England Working Group on Sterling Risk-Free
Reference Rates, 10 September 2020
The Working Group provides practical steps that lenders and
borrowers can take now to amend existing GBP LIBOR referencing
loans.
Survey on RFR Compounding Conventions for
the Sterling Loan Market and Aggregated and anonymised summary of
results
Bank of England Working Group on Sterling Risk-Free
Reference Rates, 1 September 2020
Summarizing the responses received by the Working Group to a June
2020 survey of market participants on compounded risk-free rate
conventions in the loan market for Sterling syndicated facilities,
multicurrency syndicated facilities where there is a Sterling
currency option, and bilateral loans.
United Kingdom - Bonds
Active Transition of GBP LIBOR-Referencing
Bonds
Bank of England Working Group on Sterling Risk-Free
Reference Rates, 10 September 2020
The Working Group provides guidance on how to transition legacy
bond transactions by way of a consent solicitation, and outlines
related risks.
Asia and Pacific Rim - General
Keynote Speech by MAS Deputy Managing
Director, Jacqueline Loh, re SGD Interest Rate Landscape
Changes
Monetary Authority of Singapore, 9 September
2020
"We are at a critical juncture. As market players know,
liquidity begets liquidity. The sooner we take steps to front-load
this change management process, the more likely we can create a
virtuous cycle, which facilitates a smooth transition to
SORA."
Keynote Speech by Steering Committee
Chairman, Samuel Tsien, re SGD Interest Rate Landscape
Changes
SC-STS, 9 September 2020
Since the start of 2020, despite the unprecedented disruption
brought on by the Covid19 outbreak, a tremendous amount of time and
effort have been spent to prepare and plan for the transition to
SORA. Those accomplishments are summarized.
UPCOMING EVENTS
Replays of all of our IBOR Transition Webinar Series presentations are available via iTunes podcasts, Google play or Spotify, as well as on the IBOR Transition Webinar Series page of our dedicated IBOR Transition portal.
SIFMA Compliance and Legal Virtual
Forum
Securities Industry and Financial Markets Association,
23-24 September 2020
As part of this two-day conference, Mayer Brown partner Marlon Paz
will lead an on-demand session for participants on Broker-Dealer
Issues & Considerations Relating to LIBOR Cessation.
Visit us at mayerbrown.com
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe - Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2020. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.