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.
United Kingdom – Syndicated and Bilateral Loans
Updated GBP loan market Q&A for the Working Group’s end-Q1 2021 recommended milestones
Bank of England, 4 June 2021
Update includes a new question 8 about how the Q1 milestone affects existing facilities with extension options.
Updated Best Practice Guide for GBP Loans
Bank of England, 4 June 2021
Update addresses calculating SONIA-based cost of carry for loans traded on the secondary market.
United Kingdom – Derivatives
The FCA and the Bank of England encourage market participants in a switch to SOFR in US dollar interest rate swap markets from 26 July
Financial Conduct Authority and Bank of England, 16 June 2021
Reporting the results of an FCA survey of market participants and noting, “In line with the MRAC Subcommittee’s recommendation, the FCA and the Bank of England support and encourage all participants in the interdealer US dollar interest rate swaps market to take the steps necessary to prepare for and implement these changes to market conventions on 26 July and shift liquidity away from USD LIBOR to SOFR.”
United Kingdom – General
CP 21/19: Proposed decision under Article 23D BMR for 6 sterling and yen LIBOR settings
Financial Conduct Authority, 24 June 2021
Proposing to require ICE Benchmark Administration, the administrator of LIBOR, to change the way 1-month, 3-month and 6-month sterling and Japanese yen LIBOR settings are determined after 2021 to secure an orderly wind-down, conditioned on any designation of those 6 LIBOR settings as Article 23A (critical) benchmarks taking effect immediately after end-2021. Comments are due by 27 August 2021.
Europe – General
Updated Q&As on the Benchmarks Regulation (BMR)
ESMA, 28 May 2021
A “practical convergence tool to promote common supervisory approaches and practices in the application of the BMR.” The update further clarifies the applicable transitional provision date for third-country benchmarks as set out in the BMR.
Joint Public Statement – Forthcoming Cessation of all LIBOR Settings
European Commission/ECB/EBA/ESMA, 24 June 2021
The European regulators “strongly encourage market participants to use the time remaining until the cessation or loss of representativeness of USD LIBOR, GBP LIBOR, JPY LIBOR, CHF LIBOR and EUR LIBOR to substantially reduce their exposure to these interest rates.”
Global – General
ISDA response to FCA on the use of powers over use of critical benchmarks under the Benchmarks Regulation
International Swaps and Derivatives Association, 17 June 2021
Responses are focused primarily on ensuring the safety and efficiency of financial markets with respect to derivatives and other financial transactions.
Documenting RFR derivatives using different approaches to compounding/averaging under the 2006 ISDA Definitions
International Swaps and Derivatives Association, 25 June 2021
Setting out how a compounded/averaged RFR may be documented under the 2006 ISDA Definitions using new Floating Rate Options for overnight RFRs in conjunction with new provisions.
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