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.
Thankful for Increasing Clarity on LIBOR’s Final Fate
Eye on IBOR blog post, 25 November 2022
On 23 November 2022 the Financial Conduct Authority published Consultation Paper CP22/21: Consultation on ‘synthetic’ US dollar LIBOR and feedback to CP22/11, in which it (a) proposed to require continued publication, under an unrepresentative “synthetic” methodology, of 1-, 3-, and 6-month USD LIBOR until the end of September 2024 and (b) announced that 3-month synthetic GBP LIBOR will continue to be published until the end of March 2024, after which each will cease permanently. Comments are requested on or prior to 6 January 2023.
United States – Syndicated and Bilateral Loans
Introducing the SOFR Cost of Carry Calculator
Loan Syndications & Trading Association, 26 October 2022
The LSTA’s calculator is programmed to compute the Cost of Carry Rate, using the average of the individual daily SOFRs during the delay period, for use in loan trades.
Spotlight on LIBOR Remediation Tools
Loan Syndications & Trading Association, 18 October 2022
Reminding the market of, and summarizing, the set of forms prepared by the LSTA of amendments designed for different remediation scenarios using Term SOFR and Daily Simple SOFR.
ARRC Releases Loan Remediation Survey Results
Alternative Reference Rates Committee, 13 October 2022
The ARRC released summary results of its 9 August 2022 Loan Remediation Survey, finding, among other things, based on 70 responses, that only 30 percent of syndicated lenders had received a significant number of amendments from an agent. In addition, over half of lender respondents expected that the majority of their LIBOR loans would only have transitioned away from LIBOR by the end of Q2 2023 or later.
Are you Ready … for the End of LIBOR?
Loan Syndications & Trading Association, 13 October 2022
Summarizing the results of the ARRC’s Loan Remediation Survey and comparing those results with market insights.
United States – Derivatives
CME Term SOFR solidifies its benchmark position - Ten Things to know about CME Term SOFR
CME Group, 17 November 2022
Information, data points, and graphs describing the adoption of CME Term SOFR. A sober statistic: “The ARRC estimated that nearly $74 trillion of USD LIBOR contracts are set to mature after the LIBOR cessation date [of 30 June 2023]…. While a great amount of work has been done, time is running out to transition these products to CME Term SOFR.”
Rate volatility cements SOFR as top liquidity pool
CME Group, 27 September 2022
Highlighting the growing role of SOFR futures and options as the leading liquidity pool for hedging short-term interest rate risks.
SOFR Options Open Interest Surpasses 10 Million Contracts as Liquidity in SOFR Deepens
CME Group, 10 August 2022
“SOFR options have now joined the top three largest fixed income listed options markets, becoming a highly liquid and leading risk management tool for our clients.”
United States – General
November 9 Meeting Readout
Alternative Reference Rates Committee, 9 November 2022
A discussion of transition progress to date, with a notable update from the Term Rate Task Force, expressing concern about some recent trends, such as securitizations using Term SOFR that did not have underlying Term SOFR assets, which were outside the scope of the ARRC’s best practice recommendations.
Comments Received on Proposed Rulemaking Implementing the Adjustable Interest Rate (LIBOR) Act
Federal Reserve Board, 31 August 2022
The Fed provided links to the comment letters that were submitted in response to the LIBOR Act rulemaking. Final rules are expected in the near future.
Canada – General
CARR agrees to begin process of developing Term CORRA benchmark
Canadian Alternative Reference Rate Working Group, 7 October 2022
Based on preliminary results of its May 2022 consultation, the full results of which will be published later this year, CARR acknowledged clear “strong demand from Canadian companies for a forward-looking Term CORRA benchmark” due to its less complex operational implications and cost and cash flow certainty.
United Kingdom – Floating Rate Notes and Bonds
FCA encourages market participants to continue transition of LIBOR-linked bonds
Financial Conduct Authority, 16 August 2022
Issuers of legacy LIBOR-linked bonds that have not converted to risk-free rates by mutual agreement (or those that may have a future LIBOR-linked dependency) and that are issued under English or other non-US laws that make consent solicitation practicable, are strongly encouraged to schedule consent solicitation processes for conversion to fair alternative rates.
United Kingdom – General
Further consultation and announcements on the wind-down of LIBOR
Financial Conduct Authority, 23 November 2022
FCA published Consultation Paper 22/21: Consultation on ‘synthetic’ US dollar LIBOR and feedback to CP22/11, in which it (a) confirmed its decision to allow 1‑ and 6‑month synthetic sterling LIBOR to cease at the end of March 2023, (b) announced its intention to compel the continued publication of 3-month synthetic sterling LIBOR until the end of March 2024, and (c) proposed a timeline, and methodology based on CME Term SOFR, for the publication of 1-, 3-, and 6-month synthetic dollar LIBOR until the end of September 2024 for use in all contracts excepted cleared derivatives.
FCA announces decision on cessation of 1- and 6-month synthetic sterling LIBOR at end-March 2023
Financial Conduct Authority, 29 September 2022
In response to its June 2022 Consultation, the Financial Conduct Authority has decided to require continued publication of the 1- and 6-month synthetic sterling LIBOR settings for a further 3 months after the end of 2022, until 31 March 2023, when those two tenors will cease to be published. FCA continues to consider the appropriate date for cessation of publication of 3-month synthetic GBP LIBOR, which has been recommended to occur after 31 March 2023. In addition, FCA announced that publication of synthetic JPY LIBOR will cease after 31 December 2022, and consideration still is being given to the case for a synthetic USD LIBOR.
Europe – Derivatives
Recommendation from the Working Group on Euro Risk-Free Rates on the availability of derivative products referencing €STR
European Securities and Markets Authority, 26 September 2022
Recommending that all reasonable steps be taken to make derivatives referencing the €STR benchmark available to customers.
Europe – General
Working Group on Euro Risk-Free Rates, 15 September 2022
Includes updates on the survey of working group members regarding their levels of USD LIBOR exposures in the EU and primary issues affecting transition to alternative rates, as well as the work of the €STR Task Force to promote the use of €STR term rates in EURIBOR fallbacks.
Asia & Pacific Rim – General
Minutes - Second Meeting of Cross-Industry Forum on Interest Rate Benchmarks
Bank of Japan, 9 September 2022
Includes comments on progress in the transition from JPY, GBP, and USD LIBOR, and trends relating to alternative rates in the Japan market.
Public Consultation on fallback issues for JBA TIBOR
JBA TIBOR Administration, 1 August 2022
Requesting comments on the following issues with respect to a potential fallback procedure for cash products (loans and bonds) referencing Japanese Yen TIBOR or Euroyen TIBOR: (i) conditions on which fallback provisions are activated (triggers), (ii) options of fallback rates that could be referenced to substitute JBA TIBOR as reference rates, and (iii) methodologies of the spread adjustment between JBA TIBOR and the fallback rate.
Global – Derivatives
Future Cessation Guidance – 2021 ISDA Interest Rate Derivatives Definitions and 2006 ISDA Definitions - Tokyo Swap Rate (for swaps referencing TIBOR)
International Swaps and Derivatives Association, 21 November 2022
For parties to over-the-counter derivative transactions that are affected by the announcement and joint outcome statement and Tokyo Swap Rate (for swaps referencing TIBOR) cessation notice published by Refinitiv on 31 October 2022 relating to the future cessation of all tenors of the Tokyo Swap Rate (for swaps referencing TIBOR).
ICE SWAP Rate® based on USD LIBOR® - Feedback Statement on Consultation on Potential Cessation
ICE Benchmark Administration, 14 November 2022
Based on the feedback received, IBA announced that it will cease the publication of all USD LIBOR ICE Swap Rate “runs” (i.e. USD LIBOR Rates 1100, USD LIBOR Spreads 1100 and USD LIBOR 1500) for all tenors immediately after publication on 30 June 2023.
ISDA Guidance - Bloomberg published Fallback Rates: Interaction between RFR publications, IBOR Fallback publications and the ISDA Definitions
International Swaps and Derivatives Association, 8 September 2022
Guidance issued in the interest of mitigating market risk and promoting the orderly and consistent application of triggers and fallbacks by market participants.
ICE SWAP Rate® based on USD LIBOR® - Consultation on Potential Cessation
ICE Benchmark Administration, 30 August 2022
Seeking feedback on IBA’s intention to cease the publication of the USD LIBOR ICE Swap Rate for all tenors immediately after publication on June 30, 2023.
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.