CFTC Chair Heath P. Tarbert urged market participants to adhere to ISDA's 2020 IBOR Fallbacks Protocol (the "Protocol"). (A Cadwalader memorandum providing an overview of the Protocol is available here.)

In a public statement on the transition, Mr. Tarbert said that given that IBORs may be unavailable after 2021, "market participants with exposures to interest rate swaps referencing LIBOR do not have an option about whether to adhere to the protocol or otherwise amend their swaps." He urged prompt action, with particular emphasis on "large numbers of asset managers and non-financial corporate entities." Mr. Tarbert further warned that (i) counterparties that fail to adopt the Protocol "risk being locked out of the interest rate swap markets" and (ii) banks and dealers "will be reluctant to enter into swaps with those counterparties because they would not be able to hedge the LIBOR exposure."

Commentary Nihal Patel

Mr. Tarbert's statement is strongly worded. It is clear that he does not believe market participants should be taking a "wait and see" approach to the Protocol.

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