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 IBOR transition 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.
New IBOR Transition Tool | Thought Leadership | News and Developments | Recent Events
NEW IBOR TRANSITION TOOL
Mayer Brown Launches IBOR Transition
Readiness Survey
Press release, 17 November 2020
Mayer Brown proudly announces the launch of the firm's
latest IBOR transition resource: an IBOR transition readiness survey jointly
developed and presented by Mayer Brown and Morae to help
organizations address the complex and imminent issue of the IBOR
transition.
THOUGHT LEADERSHIP
Transition from LIBOR: An Update from
Thailand
Eye on IBOR Transition Blog, 24 November
2020
In response to the cessation of LIBOR at the end of 2021,
the Bank of Thailand has recommended the Thai Overnight Repurchase
Rate ("THOR") as the alternative benchmark rate for the
Thai Baht Interest Rate Fixing ("THBFIX"), and has issued
Transition Milestones for financial institutions to move away from
THBFIX to THOR.
Transition from Singapore Dollar Swap
Offer Rate to Singapore Overnight Rate Average – An
Update
Eye on IBOR Transition Blog, 23 November 2020
On 27 October 2020, the Singapore benchmark transition
steering committee announced recommended timelines and a series of
market guides to assist market participants in preparing for the
transition from SOR to SORA.
Will Amending a Facility Agreement to Move
from an IBOR to an RFR Require Guarantee and Security
Confirmations?
Eye on IBOR Transition Blog, 20 November 2020
The significant investment of time and money by market
participants to amend a huge number of legacy deals to reflect a
transition from IBORs to RFRs will be exacerbated if, in addition
to amending loan agreements, it also will be necessary to obtain
guarantee and pledged collateral confirmations.
"The End is Nigh": UK FCA Issues
Consultations Regarding Expected New Benchmark Powers in Response
to ICE Benchmark Announcement; ISDA Issues Related
Statement
Eye on IBOR Transition Blog, 18 November 2020
ICE Benchmark Administration announced its intention to
consult on the cessation of EUR, GBP, JPY, and CHF LIBOR after 31
December 2021, prompting the UK FCA to announce related
consultations regarding the exercise of its proposed new powers to
manage benchmark transition in an orderly manner, and prompting
ISDA to state that neither of these announcements constitutes an
index cessation event.
APLMA launches the first SOFR-based
facility agreements for syndicated loans in Asia
Pacific
Eye on IBOR Transition Blog, 16 November 2020
The Asia Pacific Loan Market Association has published two
discussion draft facility agreements referencing risk-free
reference rates for US dollar syndicated loan transactions in the
Asia Pacific region—one based on compounded SOFR and one
based on simple SOFR—providing a recommended market standard
for RFR calculation formulae, pricing methodology, and institution
operational practice in the Asia loan market.
"To SOFR or Not to SOFR?":
Prudential Banking Regulators Encourage Fallback Provisions to an
"Appropriate" LIBOR Replacement Rate
Eye on IBOR Transition Blog, 6 November 2020
The regulators released a statement in which they stated
that a bank may use "any reference rate for its loans that the
bank determines to be appropriate for its funding model and
customer needs," so long as it is robust, and related
contracts include fallback language.
ARRC Requests Changes to Bank Regulatory
Capital and Liquidity Requirements to Facilitate Transition from
LIBOR to SOFR
Eye on IBOR Transition Blog, 4 November 2020
In a detailed 25-page memorandum to U.S. prudential
banking regulators, the Alternative Reference Rates Committee
detailed concerns regarding the transition from LIBOR to SOFR and
possible effects on current U.S. bank regulatory capital and
liquidity requirements.
NEWS AND DEVELOPMENTS
United States – Syndicated and Bilateral Loans
Statement on Reference Rates for
Loans
Federal Reserve Board, FDIC, and OCC, 6 November
2020
A statement from banking regulators to reiterate that they are not
endorsing a specific replacement rate for LIBOR for loans and
encouraging banks to determine appropriate reference rates for
their lending activities and begin transitioning loans away from
LIBOR without delay.
United Kingdom – General
FCA consults on new benchmarks
powers
Financial Conduct Authority, 18 November 2020
In connection with the announcement by ICE Benchmark
Authority of its intention to cease quotation of GBP, EUR, CHF, and
JPY LIBOR after 31 December 2021, FCA announced that it will
consult on a policy for implementing its proposed new powers under
the Financial Services Bill.
ICE Benchmark Administration to Consult On
Its Intention to Cease the Publication of GBP, EUR, CHF and JPY
LIBOR
Intercontinental Exchange, 18 November 2020
IBA will, in the near future, consult on its intention to
cease the publication after December 31, 2021, of all tenors of
GBP, EUR, CHF, and JPY LIBOR settings.
Europe – General
Public Consultation on EURIBOR Fallback
Trigger Events
Working Group on Euro Risk-Free Rates, 23 November
2020
The working group has identified a generic set of
potential permanent EURIBOR fallback trigger events that market
participants could consider including in fallback provisions in
their contracts and financial instruments referencing EURIBOR.
Comments on the proposed triggers are due by 15 January 2021.
Public Consultation on €STR-Based
EURIBOR Fallback Rates
Working Group on Euro Risk-Free Rates, 23 November
2020
Surveying market participants, organizations representing
market participants, and other interested stakeholders, with regard
to the most appropriate EURIBOR fallback provisions for cash
products, including rate structure, spread adjustment, and market
calculation conventions. Comments are due by 15 January 2021.
Asia and Pacific Rim – Derivatives
Statement regarding Adherence to the IBOR
Fallbacks Protocol Launched by ISDA
Bank of Japan, 6 November 2020
The Cross-Industry Committee on Japanese Yen Interest Rate
Benchmarks strongly encourages early adherence to the Protocol by
both financial and non-financial firms in order to promote the
smooth transition away from LIBOR.
Asia and Pacific Rim - General
TMA's administered benchmarks are
IOSCO compliant
Treasury Markets Association, 9 November 2020
Statement that the benchmarks administered by TMA are
complaint with the International Organisation of Securities
Commissions Principles for Financial Benchmarks.
Reports from the 5 November 2020 Meeting
of the Cross-Industry Committee on Japanese Yen Interest Rate
Benchmarks
Bank of Japan, 5 November 2020
Reports include updates on loan spread adjustment
methodologies, term reference rates, the publication of prototype
term reference rates, and hedge accounting treatment for
LIBOR-referencing instruments.
Global – Derivatives
ISDA Statement on IBA and UK FCA
Announcements on LIBOR Consultations
ISDA, 18 November 2020
"Neither [the statement by IBA nor the statement by
FCA] constitute an index cessation event under the IBOR Fallbacks
Supplement or the ISDA 2020 IBOR Fallbacks Protocol. Therefore,
these statements will not trigger the fallbacks under the
supplement or protocol (ie, to the adjusted risk-free rate plus
spread) or have any effect on the calculation of the spread. These
statements will also not trigger fallbacks under the 2018 ISDA
Benchmarks Supplement or its protocol."
RECENT EVENT
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.
Exploring credit sensitive alternatives to
SOFR
IBOR Transition Webinar Series, 18.12 minute listen, 10
November 2020
Mayer Brown Partner Paul Forrester and Heidi Rudolph,
Managing Director at Morae Global, discuss topics including: Why is
there a need for credit sensitive rate? What are the "credit
sensitive" alternatives to SOFR? How can banks use modelling
techniques to identify, quantify and mitigate credit exposures (and
preserve their profit margins) across their portfolios? How can
banks ensure that these modelling techniques are transparent so
that borrowers can anticipate and manage their borrowing cost?
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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.