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.
The Benchmark Bistro in the Export Finance Market
Eye on IBOR Transition Blog, 23 March 2021
UK Finance partner, Ash McDermott, provides a flavour of what is emerging in terms of benchmark alternatives as the end of LIBOR comes closer in his article, "What's on the menu at the benchmark bistro?" for the 22 March 2021 edition of Berne Union's The BUlletin.
United States – Adjustable Rate Mortgages
Update on Enterprise Transition from LIBOR to an Alternative Index for Single-Family ARMs
Federal Housing Finance Agency, 17 March 2021
Providing an update on the progress of Fannie Mae and Freddie Mac with respect to LIBOR transition for single-family adjustable rate mortgages since their prior white paper in March 2020. In addressing the key risks, the update notes that, with respect to new ARM products, the GSEs began to purchase SOFR-indexed ARMs and ceased purchasing LIBOR-indexed ARMs, and with respect to legacy ARM products, there was “a notable decrease” in the volume of loans that need to be transitioned to a replacement rate.
United States - General
ARRC Provides Update on Forward-Looking SOFR Term Rate - Market Participants Encouraged to Transition without Reliance on SOFR Term Rate
Alternative Reference Rates Committee, 23 March 2021
The ARRC will not be in a position to recommend a forward-looking SOFR term rate by mid-2021, and encourages market participants to continue to transition from LIBOR using the tools available now.
Progress Report: The Transition from U.S. Dollar LIBOR
Alternative Reference Rates Committee, 22 March 2021
“Recent announcements lay out a definitive endgame for USD LIBOR: The cessation date for representative LIBOR is clear, the level of spread adjustments for ISDA and ARRC-recommended fallbacks has been set, and supervisory guidance has called for no new LIBOR contracts after end-2021.”
An Updated User’s Guide to SOFR
Alternative Reference Rates Committee, 1 March 2021
Updating guidance regarding how market participants can use SOFR in cash products.
Europe – General
ECB starts publishing compounded euro short-term rate (€STR) average rates on 15 April 2021
European Central Bank, 18 March 2021
Publication will include compounded €STR average rates for tenors of 1 week, 1 month, 3 months, 6 months and 12 months, as well as a compounded €STR index enabling the derivation of compounded rates for any non-standard tenor.
Swiss Index – Methodology Rulebook Governing the Swiss Reference Rates
Swiss Infrastructure and Exchange, 18 January 2021
The general principles governing index methodology are that reference rates must be representative, tradable, replicable, stable, rules-based, projectable, and transparent.
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. Join us for the following upcoming event.
The Beginning of the End - Implications of the IBA and FCA announcements on the cessation of LIBOR
Webinar, 7 April 2021, at 8:00 CT/9:00 ET (Invitation to follow)
This introductory webinar will focus on the key takeaways and practical considerations resulting from the March 5 IBA and FCA announcements on the cessation of LIBOR, including:
- What is “synthetic LIBOR” and how might it be used?
- Key considerations for making and hedging SOFR and other alternative rate loans, and,
- Implications for fallback provisions
We also will set the stage for future webinars that will take a deeper dive into these topics and related risks and regulatory requirements.