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 Leadership | News and Developments | Events
Fed Adopts Final Rule Implementing the Adjustable Interest Rate (LIBOR) ActLegal Update, 20 December 2022
The rule responds to several rulemaking requirements of the LIBOR Act, and resolves some of the remaining questions about how outstanding USD LIBOR contracts will transition to a replacement rate after USD LIBOR ceases publication in June 2023.
View all of our IBOR transition thought leadership under the Perspectives tab of our IBOR Transition portal page and on our Eye on IBOR Transition blog.
United States – Syndicated and Bilateral Loans
LIBOR’s Ending! Act Now!
Loan Syndications & Trading Association, 18 January 2023
Discussing issues that should be at the top of market participants’ minds: transition status, synthetic USD LIBOR, conforming changes, and the treatment of legacy contracts.
Implementing the LIBOR Act: The Federal Reserve’s Final Rule
Loan Syndications & Trading Association, 13 January 2023
Webcast explaining the Fed’s regulation implementing the LIBOR Act.
Implementing the LIBOR Act: Part 1 and Part 2
Loan Syndications & Trading Association, 5 and 11 January 2023
A high- level look at the provisions of the final rule that are most salient for LSTA members.
Synthetic LIBOR: What It Means for LIBOR Transition
Loan Syndications & Trading Association, 15 December 2022
If the FCA’s synthetic LIBOR consultation goes live in the current format, it will be a boon for borrowers with pre-2018 loans without formal fallback language that would otherwise go to Prime.
United States – Derivatives
January 2023 Rates Recap
CME Group, 10 January 2023
“SOFR futures and options kick off 2023 as the leading tools for hedging short-term interest rates, with expansive liquidity supporting an unparalleled range of linear and non-linear strategies across the forward curve.”
United States – General
Regulations Implementing the Adjustable Interest Rate (LIBOR) Act
Board of Governors of the Federal Reserve System, 26 January 2023
The final regulations implementing the Adjustable Interest Rate (LIBOR) Act were adopted by the Board on 16 December 2022 and published in the Federal Register—starting the 30-day clock to effectiveness—on 26 January 2023. The final rules are substantially similar to the proposed rules published on 28 July 2022.
Summary of Key ARRC Recommendations
Alternative Reference Rates Committee, 25 January 2023
Emphasizing recommendations to remediate LIBOR contracts well in advance of 30 June 2023, communicate transition plans to affected parties as soon as possible, and use SOFR! The ARRC also quoted the December FSOC meeting statement that consideration by the UK Financial Conduct Authority of a synthetic USD LIBOR does not alter “supervisory expectations for LIBOR transition.”
AARC January 19 Meeting Readout
Alternative Reference Rates Committee, 19 January 2023
Among other things, the Term Rate Task Force provided an update on its discussions around its existing ARRC best practice recommendations on the scope of use of Term SOFR, discussed the strong and consistent messaging across the official sector, and reiterated its existing best practice recommendations, which it will continue to assess.
Financial Stability Oversight Council Principals Meeting
U.S. Department of Treasury, 16 December 2022
The first item on the agenda at the December FSOC meeting was a discussion of the current market resistance to the recommended restriction on the use of Term SOFR in derivative and non-loan cash products. Some key quotes: (1) Vice Chair Barr – “Overnight SOFR needs to remain the primary tool for derivatives and capital markets…. A world in which Term SOFR is used across all or most cash products is not … consistent with sustaining a robust market for overnight SOFR derivatives—the foundation for Term SOFR rates.” (2) Secretary Yellen – “It’s important that market participants help ensure that the problems with LIBOR are not repeated. That means keeping the use of Term SOFR limited to the areas that the ARRC has recommended….” (3) Chair Powell – “I want to strongly reinforce … that financial markets need to avoid recreating the same problems that plagued LIBOR.” (4) Chair Gensler – stated that BSBY—the Bloomberg Short-Term Bank Yield Index—has “infirmities that will not stand the test of time” and opined that it does not meet IOSCO principles for a stable and reliable benchmark, and that Term SOFR “is only meaningful if there’s a deep and liquid underlying SOFR rate.”
FSOC 2022 Annual Report
Financial Stability Oversight Council, 16 December 2022
The Council’s recommendation at the end of its discussion of Alternative Reference Rates in Section 3.3.2 states, “Council members have emphasized that derivatives and capital markets should continue moving to SOFR, a broad and robust measure of borrowing rates. While the Council recognizes the usefulness of Term SOFR in certain business lending transactions, it endorses the ARRC’s recommendations to limit the use of Term SOFR in other markets and strongly encourages market participants to limit the usage of Term SOFR in derivatives and most other cash markets.”
Canada – Derivatives
CARR’s CORRA-first initiatives for derivatives to begin on January 9 - update
Canadian Alternative Reference Rate Working Group, 15 December 2022
Highlighting the CORRA-first dates related to the Canadian derivatives market, on which the inter-dealer quotations that banks/dealers post in the inter-dealer market will switch from CDOR to the Canadian Overnight Repo Rate Average (CORRA). Inter-dealer linear derivatives (i.e., Canadian dollar interest rate swaps) moved from CDOR to CORRA on 9 January 2023, and both inter-dealer non-linear derivatives (i.e., Canadian dollar swaptions) and inter-dealer cross-currency swaps will move from CDOR to CORRA on 27 March 2023.
Canada – General
CARR announces development of a Term CORRA benchmark
Canadian Alternative Reference Rate Working Group, 11 January 2023
Efforts are underway to develop a 1- and 3-month Term CORRA benchmark with the objective of making such benchmarks available for use by the end of the third quarter of 2023.
CARR’s approved use cases for Term CORRA
Canadian Alternative Reference Rate Working Group, 11 January 2023
The approved uses of Term CORRA are (i) loan products, (ii) trade financing/receivables discounting, and (iii) specified single currency derivatives for end-users hedging Term CORRA-based loans. Uses not approved include floating rate notes, securitizations, and capital securities, among others.
Term CORRA Methodology – CARR Recommended Approach
Canadian Alternative Reference Rate Working Group, 11 January 2023
CARR is establishing the parameters for the creation of an IOSCO-compliant benchmark. While most financial instruments will reference overnight CORRA, CARR is identifying specific use cases for the use of Term CORRA.
The Administration of Term CORRA
Canadian Alternative Reference Rate Working Group, 11 January 2023
CanDeal Innovations Inc. has been selected to produce and manage Term CORRA, with licensing and distribution capabilities provided by TSX Inc. through its information services division, TMX Datalinx.
Consultation on a potential new term interest rate to replace CDOR in certain financial instruments - Summary of results
Canadian Alternative Reference Rate Working Group, 11 January 2023
The vast majority of respondents indicated a desire for Term CORRA (1-month being favored more than 3-month), noting cash flow predictability and operational simplicity. Respondents also supported the use of Term CORRA beyond loans and trade finance.
CARR and TMX launch webcast series on the transition from CDOR
Canadian Alternative Reference Rate Working Group, 11 January 2023
Webcasts will provide practical advice and guidance to those affected by CDOR’s upcoming cessation. The first webcast, discussing the Transition Roadmap, is now available to view at the TMX webpage.
United Kingdom – Floating Rate Notes and Bonds
Summary Minutes of Sub-Group and Task Force Meetings – December 2022
Bond Market Subgroup of Working Group of the Working Group on Sterling Risk-Free Reference Rates, 20 December 2022
Summarizing the matters discussed at the September and November subgroup meetings, including progress on the active transition of legacy synthetic GBP LIBOR bonds to SONIA and legacy USD LIBOR bonds under English law to SOFR, and the November FCA consultation on synthetic USD LIBOR.
Europe – General
Euro Working Group Meeting Minutes – 13 December 2022
Working Group on Euro Risk-Free Rates, 3 February 2023
Discussing trends in the adoption of EURIBOR fallbacks in the derivatives, bond and loans markets, and task force deliverables for 2023.
Swiss Working Group Meeting Minutes – 9 November 2022
National Working Group on Swiss Franc Reference Rates, 29 November 2022
Members were briefed on LIBOR transition legislation in various jurisdictions and were updated on the status of transition from CHF LIBOR to SARON in the derivatives and loans markets. It was determined that the transition to SARON is conceptually completed and the operational transition to SARON is on track, and as a result the working group will cease to exist after the end of 2022.
Asia & Pacific Rim – General
Reform of interest rate benchmarks
Hong Kong Monetary Authority, 19 December 2022
Authorized institutions in Hong Kong have made substantial progress in transitioning away from LIBOR to alternative reference rates. Based on the results of a September 2022 survey, the number of contracts referencing the remaining USD LIBOR settings requiring renegotiation fell by more than 90%, from a peak at the end of September 2020.
Implementation of Supplementary Guidance on Adjustment Spreads for the Conversion of Legacy SOR Loans to SORA
Steering Committee for SOR & SIBOR Transition to SORA, 14 December 2022
Providing technical details for the setting of adjustment spreads for the conversion of wholesale SOR contracts (i.e., bilateral and syndicated corporate loans, bonds, and derivatives, but not retail loans) to compounded-in-arrears SORA, in line with the July 2022 Response to Consultation Feedback - Consultation on Adjustment Spreads for the Conversion of Legacy SOR Contracts to SORA.
Adjustment Spread Calculator for Active Transition of Institutional SOR Contracts
Steering Committee for SOR & SIBOR Transition to SORA, 14 December 2022
Allows contract parties to compute adjustment spreads based on the tenor and remaining maturity of their contract.
Global – Floating Rate Notes and Bonds
Quarterly Assessment: The transition of legacy US dollar LIBOR bonds under English law
International Capital Markets Association, Fourth Quarter 2022
Making the case that providing synthetic USD LIBOR for legacy USD LIBOR bonds outstanding under English law should help to minimize the risk of market disruption and litigation, and could ensure international alignment between the UK market and the US market.
Global – General
Progress Report on LIBOR and Other Benchmarks Transition Issues
Financial Stability Board, 16 December 2022
The report provides a summary of transition progress in select jurisdictions, and concludes by stating that although significant progress has been made in improving the resilience of the benchmark reference rate landscape, global coordination to address the remaining issues, such as legacy contracts, continues to be of the essence.
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.
