March 09, 2021

IBOR Transition Digest

Share

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.

Thought Leadership | News and Developments | Events


 

THOUGHT LEADERSHIP

IBA Sets LIBOR Publication Cessation Dates and Triggers a LIBOR Transition Event
Eye on IBOR Transition Blog, 5 March 2021
On 5 March 2021, ICE Benchmark Administration, the administrator of LIBOR, released the much anticipated feedback statement reporting the results of its 4 December 2020 Consultation on Potential Cessation and confirming its previously proposed cessation dates.

US FRB Chair Powell Signals Support for Federal LIBOR Transition Assistance Legislation
Eye on IBOR Transition Blog, 26 February 2021
In testimony before the House Committee on Financial Services on February 24, Jerome Powell, Chairman of the Federal Reserve Board, stated that federal legislation “is the best answer” to address “tough legacy” LIBOR contracts that do not mature prior to 30 June 2023.

 

NEWS AND DEVELOPMENTS

Global – General

ICE Benchmark Administration Publishes Feedback Statement for the Consultation on Its Intention to Cease the Publication of LIBOR Settings
ICE Benchmark Administration, 5 March 2021
IBA received a broad of range of feedback from multiple stakeholders, both on the dates specified for cessation and on the LIBOR transition process generally.

ICE LIBOR Feedback Statement on Consultation on Potential Cessation
ICE Benchmark Administration, 5 March 2021
In the absence of sufficient panel bank support, and without the intervention of the FCA to compel continued panel bank contributions to LIBOR, it is not possible for IBA to publish the relevant LIBOR settings on a representative basis beyond the proposed cessation dates for such settings. As a result of IBA not having access to input data necessary to calculate LIBOR settings on a representative basis beyond the proposed cessation dates for such settings, IBA has to cease the publication of [all LIBOR settings as of the applicable specified dates] unless the FCA exercises its proposed new powers to require IBA to continue publishing these LIBOR settings using a changed methodology (also known as a “synthetic” basis).

FCA Statement on future cessation and loss of representativeness of the LIBOR benchmarks
Financial Conduct Authority, 5 March 2021
FCA does not intend to use its proposed new powers to compel publication of any tenors of CHF or EUR, but will consult regarding doing so for 1-, 3-, and 6-month tenors of GBP and JPY, and will consider doing the same for those tenors of USD LIBOR, but in all cases on a synthetic basis that would not be representative of underlying markets.

Announcements on the end of LIBOR
Bank of England, 5 March 2021
“Today’s announcements confirm the importance of preparations [for a smooth transition in advance of LIBOR ceasing] for all users of LIBOR. Regulated firms should expect further engagement from their supervisors at both the Prudential Regulation Authority and the FCA to ensure these timelines are met.”

ISDA Statement on the UK FCA LIBOR Announcement
International Swaps and Derivatives Association, 5 March 2021
“Today’s announcement [by the FCA] constitutes an index cessation event under the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol for all 35 LIBOR settings. As a result, the fallback spread adjustment published by Bloomberg is fixed as of the date of the announcement for all euro, sterling, Swiss franc, US dollar and yen LIBOR settings.”

Future Cessation and Non-Representativeness Guidance
International Swaps and Derivatives Association, 5 March 2021 and updated 8 March 2021
“The purpose of this Guidance is … to describe how the terms of the ISDA 2020 IBOR Fallbacks Protocol … and Supplement number 70 to the 2006 ISDA Definitions … [as well as the 2018 ISDA Benchmarks Supplement] apply to the FCA LIBOR Announcement,” and includes a Summary Table of relevant dates and information.

IBOR Fallbacks: Technical Notice – Spread Fixing Event for LIBOR
Bloomberg, 5 March 2021
Setting forth “every LIBOR Tenor, Ticker and associated fixed Spread Adjustment” for the five key LIBOR currencies.

ARRC Commends Decisions Outlining the Definitive Endgame for LIBOR
Alternative Reference Rates Committee, 5 March 2021
“We now know when a representative USD LIBOR will end and what its associated spread adjustments will be in no uncertain terms,” and noting that “supervisors will focus on ensuring that firms are managing the remaining transition risks.” The statement acknowledged additional support from the Federal Reserve Board and Commodity Futures Trading Commission.

LIBOR Cessation Dates Officially Announced
Structured Finance Association, 5 March 2021
Expressing pleasure with the adoption of the extension for USD LIBOR for legacy contracts and support for a legislative solution allowing time for USD LIBOR transactions executed before January 1, 2022 to mature.

Response to the announcement on the end date of LIBOR panel publication and the announcement on the intention to consult on the publication of synthetic yen LIBOR
Bank of Japan, 8 March 2021
Discussing actions to be taken prior to the end of 2021 and potential uses of a synthetic JPY LIBOR, and recommending that synthetic JPY LIBOR should be considered a safety net and used only for tough legacy contracts.

Overview Document: Benchmark Regulation and proposed amendments under the Financial Services Bill
Financial Conduct Authority, 5 March 2021
Providing background regarding the proposed amendments to the Benchmark Regulation in relation to managing the orderly wind-down of critical benchmarks.

Statement of Policy on the designation of benchmarks under Article 23A BMR and related Feedback Statement
Financial Conduct Authority, 5 March 2021
Article 23A grants the FCA the ability, in defined circumstances, to designate a critical benchmark as an Article 23A benchmark, resulting in a general prohibition on use of the benchmark by supervised entities. The Statement of Policy identifies relevant factors that would be considered in so designating a critical benchmark.

Statement of Policy on the designation of benchmarks under Article 23D BMR and related Feedback Statement
Financial Conduct Authority, 5 March 2021
Article 23D grants the FCA the ability, in defined circumstances, to impose requirements on the benchmark administrator, with respect to a critical benchmark that has been designated as an Article 23A benchmark, relating to the way in which the benchmark is determined, the rules of the benchmark and its code of conduct.

United States – General

ARRC confirms a "Benchmark Transition Event" has occurred under ARRC fallback language
Alternative Reference Rates Committee, 8 March 2021
Confirming that in its opinion, the 5 March 2021 announcements by IBA and FCA constitutes a “Benchmark Transition Event” under its recommended fallback language.

ARRC FAQs Regarding the Occurrence of a Benchmark Transition Event
Alternative Reference Rates Committee, 8 March 2021
Clarifying the effect of the 5 March 2021 IBA and FCA announcements.

Asia/Pacific Rim – Derivatives

Central Clearing of SORA Derivatives Extended to 21-Year Tenor
Steering Committee for SOR & SIBOR Transition to SORA, 22 February 2021
LCH extended central clearing for OTC SORA derivatives to enable the build-up of liquidity across all tenors of SORA overnight index swaps and basis swaps between SOR and SORA.

Global – General

LIBOR Cessation and the Impact on Fallbacks – informal comments by ISDA CEO, Scott O’Malia
International Swaps and Derivatives Association, 5 March 2021
“Now the deadlines and spread adjustments for the fallback rates are fixed, firms can push forward with their transition initiatives. With under 10 months to go until 24 LIBOR settings completely cease and another six become non-representative, there’s not much time left.”

 

MAYER BROWN 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.

Stay Up To Date With Our Insights

See how we use a multidisciplinary, integrated approach to meet our clients' needs.
Subscribe