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.
HKMA Circular on Term SOFR, new USD LIBOR-linked contracts after 2021, and stepping up surveillance of AI readiness
Eye on IBOR Transition blog, 24 August 2021
Discussing the 19 August 2021 letter from the Hong Kong Monetary Authority to Authorised Institutions outlining recent developments relating to interest rate reform.
A Closer Look at the Adjustable Interest Rate (LIBOR) Act of 2021
Eye on IBOR Transition blog, 17 August 2021
Summarizing some of the differences between the New York LIBOR replacement legislation and the federal Adjustable Interest Rate (LIBOR) Act of 2021.
United States – General
Frequently Asked Questions on Best Practice Recommendations Related to Scope of Use of the Term Rate
Alternative Reference Rates Committee, 27 August 2021
Clarifying certain common questions, including the use of term SOFR in non-loan products.
Updated Best Practice Recommendations Related to Scope of Use of the Term Rate
Alternative Reference Rates Committee, 27 August 2021
Updating the 21 July 2021 best practices following the formal recommendation of term SOFR.
ARRC Welcomes Launch of Refinitiv’s USD IBOR Cash Fallbacks Prototype
Alternative Reference Rates Committee, 11 August 2021
There are two versions of the published rates: consumer and institutional cash products. Both are calculated to 5 decimal places. Consumer fallbacks are based on SOFR compounded in advance for 1-, 3-, and 6-month tenors, both with and without a floor. In contrast, institutional fallbacks are published based on SOFR compounded in arrears, daily simple SOFR, and SOFR compounded in advance (with term SOFR to follow at a later date) for 7 tenors (overnight, 1 week, and 1, 2, 3, 6, and 12 month), with and without a lookback, observation shift, and lockout.
United Kingdom – Syndicated and Bilateral Loans
Transitioning legacy LIBOR syndicated loan facilities to compounded risk-free reference rates – practical guidance for the documentary amendment process
Loan Market Association, 3 August 2021
An overview of a proposed process for efficiently amending legacy LIBOR loan documentation.
Europe – General
Letter to the European Commission regarding draft implementing Act designating EONIA as a critical benchmark
European RFR Working Group, 2 September 2021
Supporting the draft Act and noting that it will provide “legal certainty” and ensure the replacement of EONIA in financial contracts in the absence of a successful renegotiation.
Further Updated Q&A on the Benchmarks Regulation
European RFR Working Group, 29 July 2021
Addressing the use of third-country benchmarks after the end of the transitional period.
Asia and Pacific Rim – Derivatives
Transition of Quoting Conventions in the Cross-Currency Swap Market
Bank of Japan, 13 August 2021
Confirming agreement with a transition start date of 21 September 2021.
Asia and Pacific Rim – General
Response to Consultation on proposed decision under Article 23D Benchmarks Regulation for 6 sterling and yen LIBOR settings
Bank of Japan, 26 August 2021
Supporting the FCA’s proposed decision, including the methodology for a synthetic LIBOR and the use of TORF (Tokyo Term Risk Free Rate) as a component, as an aid in “the orderly wind-down of Japanese yen LIBOR in Japan” and a “safety net” for dealing with certain legacy contracts.
Letter to Authorised Institutions re Reform of Interest Rate Benchmarks
Hong Kong Monetary Authority, 19 August 2021
Supporting the ARRC’s 29 July 2021 recommendation of term SOFR and stating an expectation that Authorised Institutions will “step up their efforts to encourage customers” to transition from LIBOR to SOFR for USD contracts.
Updated Timelines to Cease Issuance of SOR and SIBOR-Linked Financial Products
Association of Banks in Singapore, 5 August 2021
Providing further clarification and updated Q&As regarding wind-down targets for cash and derivative products.
Global – General
ISDA Responds to FCA on LIBOR Transition and the DTO
International Swaps and Derivatives Association, 31 August 2021
Requesting that the FCA consider phasing in any new products that will be subject to the derivatives trading obligation.
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.
Webinar, 13 September 2021, at 12:00 pm CT/1:00 pm ET
Join Mayer Brown attorneys Brad Berman, Ryan Castillo, and Jerry Marlatt, who will discuss the Secured Overnight Financing Rates (SOFR) as a LIBOR replacement, including an overview of the progress and hurdles to date. Specific topics include:
- The development of SOFR as a benchmark, including term SOFR
- ARRC statements on SOFR
- The mechanics of SOFR and examples of SOFR offerings
- Alternatives to SOFR