The IBOR Transition Digest is a periodic compendium of global regulatory and market developments and insights on the complex issues confronting financial market participants as they continue to transition from LIBOR and its variants to replacement benchmark interest rates. As the market moves to the next phase of IBOR transition, 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 LeadershipNews and Developments | Events


 

THOUGHT LEADERSHIP

Switching to SOFR: Proposed Rule Published to Implement the 2022 Federal LIBOR Act
Eye on IBOR blog, 2 August 2022
Summarizing the proposed rule, highlighting some of the specific questions that the rulemaking notice asks, and sharing our observations on the proposed rule, on which comments are due by 29 August 2022.

No foolin’: USD LIBOR to sunset one year from today
Eye on IBOR blog, 30 June 2022
Reminding market participants of the USD LIBOR cessation date of 30 June 2023, and discussing the possibility of a synthetic LIBOR, which is the topic of a new consultation by the UK Financial Conduct Authority.

 

NEWS AND DEVELOPMENTS

United States – Syndicated and Bilateral Loans 

ARRC Releases Loan Remediation Survey
Alternative Reference Rates Committee, 9 August 2022
In line with the best practices recommended in the ARRC’s 11 July 2022 LIBOR Legacy Playbook, the new Loan Remediation Survey is being issued to assist the ARRC and market participants in assessing LIBOR transition readiness and related potential operational challenges. The survey is intended for both lenders and borrowers. Input is requested by 7 September 2022.

United States – Derivatives

Clearing Requirement Determination Under Section 2(h) of the Commodity Exchange Act for Interest Rate Swaps To Account for the Transition From LIBOR and Other IBORs to Alternative Reference Rates
Commodity Futures Trading Commission, 31 May 2022
In this notice of proposed rulemaking, the CFTC proposes to amend its interest rate swap clearing requirement regulations to reflect the market shift away from swaps that reference IBORs to swaps that reference risk-free rates. Comments were due by 30 June 2022.

United States – General

Regulation Implementing the Adjustable Interest Rate (LIBOR) Act
Board of Governors of the Federal Reserve System, 28 July 2022
Inviting comment by 29 August 2022 on a proposed regulation that would establish benchmark replacements for contracts governed by U.S. law that reference certain tenors of USD LIBOR and that do not provide for a clearly defined replacement benchmark rate. The proposed rule also would provide additional definitions and clarifications consistent with the Adjustable Interest Rate (LIBOR) Act.

ARRC Releases Guide to Support Transition of Legacy LIBOR Cash Products
Alternative Reference Rates Committee, 11 July 2022
The ARRC has published a LIBOR Legacy Playbook providing tools, resources, and “best practices,” to assist in making the transition from LIBOR to SOFR “operationally successful,” including assessing the fallbacks in LIBOR contract portfolios, remediating such contracts prior to June 2023 where possible, adopting a communication plan for contract counterparties, and ensuring sufficient internal resources to effect the transition.

ARRC Welcomes Statement by Refinitiv that it Intends to Publish ARRC-Recommended Fallback Rates Based on CME Term SOFR Rates in September
Alternative Reference Rates Committee, 11 July 2022
The ARRC notes that Refinitiv’s published rates will be “especially helpful for legacy consumer loans, where consumers will need clear and simple resources that can provide them access to the new rate that will replace LIBOR in their contracts,” and advises that it is working with Refinitiv to design a web page for consumers that provides information about the most recently available rate and its recent history.

Refinitiv to launch forward looking term rate versions of ARRC recommended fallback rates this September to facilitate industry transition from USD LIBOR
Refinitiv, 11 July 2022
In line with the ARRC’s March 2021 selection of Refinitiv to publish recommended fallback rates, and Refinitiv’s November 2021 announcement about the availability of prototype rates, Refinitiv has announced that it will begin to publish two forward looking term rate versions of its ARRC recommended fallback rates (USD IBOR Cash Fallbacks) in September 2022: one for institutional cash products and one for consumer cash products, and each in 1-, 3-, 6-, and 12-month tenors. These forward looking rates will be all-inclusive (i.e., the respective CME Term SOFR + the ARRC-recommended, ISDA-aligned spread adjustment) and are intended to provide the market an “industry standard agreed rate, which can clearly and easily be referenced in contracts” and will aid the transition from LIBOR to SOFR in legacy products.

Canada – Syndicated and Bilateral Loans

CARR publishes recommended fallback language for CDOR-based loans - English Version and French Version
Canadian Alternative Reference Rate Working Group, 3 August 2022
CARR has developed the recommended fallback language for CDOR-referencing loans in consultation with both lenders and borrowers.

Recommended fallback language for loans referencing CDOR - English Version and French Version
Canadian Alternative Reference Rate Working Group, 3 August 2022
The recommended fallback language is for both new and existing loan agreements and provides a hardwired fallback to CORRA, with the first step in the waterfall to Term CORRA and the second step to CORRA compounded in arrears. Credit spread adjustments consistent with those used by ISDA also are recommended.

Canada – General

Overview of CARR’s Transition Roadmap
Canadian Alternative Reference Rate Working Group, 4 August 2022
Providing background on the working group’s primary objectives, relevant stakeholders, analysis and recommendations, and transition plan by product category, including an updated CDOR transition roadmap and milestones.

United Kingdom – General

Consultation Paper CP22/11: Winding down ‘synthetic’ sterling LIBOR and US dollar LIBOR
Financial Conduct Authority, 30 June 2022
Noting that it has “been clear that synthetic LIBOR is only temporary” and that it will not compel ICE Benchmark Administration to continue to publish LIBOR “for the convenience of those who could take action to convert their contracts, but have not done so,” FCA is seeking comments, due 24 August 2022, on (a) ceasing publication of 1- and 6-month synthetic GBP LIBOR at the end of March 2023 rather than the end of December 2022, (b) when it might be appropriate to retire 3-month synthetic GBP LIBOR, and (c) whether a synthetic USD LIBOR rate might be appropriate for “certain contracts that are not within scope of LIBOR-related federal legislation.”

Europe – General

Hybrid Conference of the Working Group on Euro Risk-Free Rates
European Securities and Markets Authority, 17 June 2022
Includes data, and discussion of the approach and timeline, relating to the production of a forward-looking term €STR rate.

Asia & Pacific Rim – General

Chinese AXI can work with the depository-institutions repo rate (DR) to serve as a reference credit spread for Chinese commercial banks to conduct credit pricing and risk management
SOFR Academy, 27 July 2022
Noting that the Chinese across-the-curve credit spread index reflects the average funding costs of major Chinese commercial banks and can work with the depository institutions repo rate to provide a transparent reference rate for loans and other products.

Industry Steering Committee Finalises the Key Settings of the MAS Recommended Rate and Supplementary Guidance for Active Transition of Legacy Wholesale Market SOR Contracts to SORA
Steering Committee for SOR & SIBOR Transition to SORA, 18 July 2022
The SORA steering committee and the Association of Banks in Singapore have finalized the key settings of the MAS Recommended Rate that will apply as the fallback reference rate to legacy SOR contracts after 31 December 2024. The rate is calculated as the sum of SORA compounded in arrears + a tenor-specific (overnight and 1-, 3-, and
6-month settings) adjustment that reflects ISDA’s methodology (i.e., the 5-year historical median of the spread between SOR and Compounded SORA-in-arrears). The settings were included in the Response to Consultation Feedback published 18 July 2022, which provides supplemental guidance on spread adjustments. Additional guidance on implementation and technical issues is expected by the end of September.

Timelines to Cease Issuance Of SOR And SIBOR-Linked Financial Products
Steering Committee for SOR & SIBOR Transition to SORA, 18 July 2022
The timelines have been updated to provide more specific recommendations regarding fallbacks and SOR contract remediation target dates.

White Paper on Across-the-Curve Credit Spread Indices (AXI) for China – English Version and Chinese Version
XIN Fintech Research Center of Tsinghua University, 20 June 2022
Part of “a broader set of international ‘RFRx’ feasibility studies,” the Chinese white paper discusses the construction and potential application of an across-the-curve credit spread index in the Chinese market.

Global – Derivatives

Differences between the June 2022 USD ISR Fallbacks Module, the November 2021 Amendment Agreement for USD ISR Fallbacks and the Updated Amendment Agreement for USD ISR Fallbacks
International Swaps and Derivatives Associate, 15 June 2022
The differences generally relate to the scope of transactions that are covered by each document.

 

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.