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
THOUGHT LEADERSHIP
CFPB Publishes Final Rule to Help Transition to a LIBOR-less World
Legal Update, 11 January 2022
On 7 December 2021, the US Consumer Financial Protection Bureau issued a final rule to facilitate the transition away from using the London Interbank Offered Rate, amending Regulation Z, which implements the Truth in Lending Act. The rule will take effect on 1 April 2022, and compliance will become mandatory on 1 October 2022.
US IRS Releases Final Regulations Addressing IBOR Transition
Legal Update, 7 January 2022
On 30 December 2021, the U.S. Internal Revenue Service (IRS) published final regulations for IBOR transition. Our Legal Update provides background on the principle U.S. federal income tax concern with IBOR-related amendments to existing contracts, an overview of previous IRS guidance aimed at addressing the concern, the types of modifications that can fit within the final regulations, the relief provided for modifications that do fit, and a few questions left open by the IRS.
US CFTC Issues Further Technical No-Action Relief and Guidance for LIBOR Transition
Legal Update, 27 December 2021
On 22 December 2021, in response to a request from the Alternative Reference Rates Committee and a further request from the Futures Industry Association, the United States Commodity Futures Trading Commission issued five technical no-action letters providing additional, and extending existing, time-limited, no-action relief and guidance for certain London Interbank Offered Rate transition matters.
The SEC Staff Statement on LIBOR Transition
REVERSEinquiries, 23 December 2021
Reminding investment professionals of their obligations when recommending LIBOR-linked securities, and reminding companies and issuers of asset-backed securities of their disclosure obligations related to the LIBOR transition.
United States – Syndicated and Bilateral Loans
Facilitating the LIBOR Transition (Regulation Z)
Consumer Financial Protection Bureau, 8 December 2021
Amending Regulation Z to (i) provide examples in the open-end and closed-end provisions of replacement indices for LIBOR indices that meet certain Regulation Z standards, (ii) permit creditors for home equity lines of credit (HELOCs) and card issuers for credit card accounts to transition existing accounts that use a LIBOR index to a replacement index on or after 1 April 2022, if certain conditions are met, (iii) address the application of change-in-terms notice provisions for HELOCs and credit card accounts transitioning away from using a LIBOR index, and (iv) address how the rate reevaluation provisions applicable to credit card accounts apply to the transition from using a LIBOR index to a replacement index.
United States – Derivatives
Quick Reference Guide to SOFR Options
CME Group, 10 January 2022
SOFR options (SR3) are designed to replicate the entire Eurodollar (ED) options product suite, including all expirations in serial and quarterly options along with all Mid-Curve and weekly Mid-Curve option.
CFTC Letter No. 21-30 re No-Action Position With Respect to Certain Requirements of Parts 43 and 45 for Registered Entities and Swap Counterparties Reporting Swap Data for LIBOR Swaps That Will Transition to Risk-Free Rates
Commodity Futures Trading Commission, 22 December 2021
Providing the conditions under which CFTC will not recommend enforcement action against an entity for failure to timely report specified changes in a swap’s floating rate made under the ISDA LIBOR fallback provisions from any tenor of Swiss Franc, Euro, British Pound Sterling or Japanese Yen LIBOR to the applicable risk-free rate (RFR).
CFTC Letter No. 21-29 re Extension of Time-Limited No-Action Relief with Respect to Treatment of Separate Accounts by Futures Commission Merchants
Commodity Futures Trading Commission, 22 December 2021
Extending the prior advisory and no-action relief in CFTC Staff Letters 19-17 and 20-28 regarding the treatment of separate accounts by futures commission merchants.
CFTC Letter No. 21-28 re Relief from the Swap Clearing Requirement for Amendments to Legacy Uncleared Swaps to Facilitate an Orderly Transition from Inter-Bank Offered Rates to Alternative Risk-Free Rates
Commodity Futures Trading Commission, 22 December 2021
Providing specified relief for uncleared interest rate swaps, certain terms of which are amended solely as part of an industry-wide initiative to amend swaps that reference IBORs to RFRs.
CFTC Letter No. 21-27 re Extension of Relief from the Trade Execution Requirement to Facilitate an Orderly Transition from Inter-Bank Offered Rates to Alternative Risk-Free Rates
Commodity Futures Trading Commission, 22 December 2021
Clarifying the application of specified trade execution requirements under the Commodity Exchange Act in order to support the industry-wide initiative to transition IBOR-linked swaps to swaps that reference alternative benchmarks.
CFTC Letter No. 21-26 re Revised No-Action Positions to Facilitate an Orderly Transition of Swaps from Inter-Bank Offered Rates to Alternative Benchmarks
Commodity Futures Trading Commission, 22 December 2021
Modifying the discussion of the end-user exception in CFTC Letter 20-23 consistent with the FCA 5 March 2021 Statement confirming the cessation or lack of representativeness of specified LIBOR settings.
United States – General
Final Regulations: Guidance on the Transition From Interbank Offered Rates to Other Reference Rates
U.S. Department of the Treasury, Internal Revenue Service, 30 December 2021
Providing guidance on the tax consequences of the transition away from the use of certain interbank offered rates in debt instruments, derivative contracts, and other contracts, to address the possibility that a modification of the terms of a contract to replace an IBOR with a new reference rate could result in the realization of income, deduction, gain, or loss for Federal income tax purposes or could have other tax consequences.
HB 925: Benchmark Replacements for London Interbank Offered Rate
Florida House of Representatives, Introduced 15 December 2021
SB 1246:Benchmark Replacements for London Interbank Offered Rate
Florida Senate, Introduced 15 December 2021
In legislation similar to laws passed in New York and Alabama, the Florida legislature has introduced bills addressing benchmark replacements for LIBOR for Florida law-governed contracts where no fallback language or insufficient fallback language is provided.
Staff Statement on LIBOR Transition – Key Considerations for Market Participants
Securities and Exchange Commission, 7 December 2021
Reminding investment professionals of their obligations when recommending LIBOR-linked securities, and reminding reporting companies and issuers of asset-backed securities of their disclosure obligations related to the LIBOR transition.
United Kingdom – General
Changes to LIBOR as of end-2021
Financial Conduct Authority, 1 January 2022
Publication of 24 LIBOR settings has ended, and the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology from 4 January 2022.
Article 23C Benchmarks Regulation - Final Notice of Permitted Legacy Use by Supervised Entities
Financial Conduct Authority, 1 January 2022
Permitting all legacy use of the Article 23A synthetic versions of 1-, 3-, and 6-month GBP and JPY LIBOR by supervised entities, other than in Cleared Derivatives, effective 1 January 2022.
Article 23D Benchmarks Regulation - Final Notice of Requirements
Financial Conduct Authority, 1 January 2022
Setting forth the requirements on ICE Benchmark Administration Limited, LIBOR’s administrator, to change the way in which 1-, 3-, and 6-month GBP and JPY LIBOR versions are determined.
Article 21A Benchmarks Regulation - Notice of Prohibition on New Use of a Critical Benchmark
Financial Conduct Authority, 1 January 2022
Prohibiting new use of overnight, 1-, 3-, 6-, and 12-month settings of USD LIBOR by supervised entities, subject to limited exceptions, from 1 January 2022.
Annex 4 Benchmarks Regulation - Notice of Modifications
Financial Conduct Authority, 1 January 2022
Setting forth the modifications to the Benchmarks Regulation that will apply to 1-, 3-, and 6-month GBP and JPY LIBOR from 1 January 2022.
Annex 4 Benchmarks Regulation - Additional Notice of Modifications
Financial Conduct Authority, 1 January 2022
Setting forth the modifications to the Benchmarks Regulation that will apply to 1-, 3-, and 6-month GBP and JPY LIBOR from 1 January 2022.
FS21/12 Feedback Statement – Decisions on the Use of LIBOR (Article 23C and 21A BMR)
Financial Conduct Authority, 10 December 2021
Summarizing the results of the 29 September 2021 CP21/29 consultation on the use of FCA’s powers under Articles 23C and 21A of the Benchmarks Regulation to require the publication of select tenors of GBP and JPY LIBOR under a synthetic methodology.
Article 23B Benchmarks Regulation – Notice Specifying the Effective Date of the Prohibition on Use of Article 23A Benchmark
Financial Conduct Authority, 10 December 2021
Providing that the prohibition on use of 1-, 3-, and 6-month GBP and JPY LIBOR will take effect on the date advised in a subsequent Article 23C notice.
FS21/11 Feedback Statement –Article 23D BMR Decision for 6 sterling and yen LIBOR versions
Financial Conduct Authority, 16 November 2021
Summarizing the results of the 24 June 2021 CP21/19 consultation on the use of FCA’s powers to require IBA to change the way GBP and JPY LIBOR settings are determined after 1 January 2022.
Article 21A Benchmarks Regulation – Notice of Prohibition on New Use of a Critical Benchmark
Financial Conduct Authority, 16 November 2021
Prohibiting new use of overnight, 1-, 3-, 6-, and 12-month USD LIBOR after 31 December 2021.
Annex 4 Benchmarks Regulation – Notice of Proposed Modifications
Financial Conduct Authority, 16 November 2021
Setting forth the modifications to the Benchmarks Regulation that will apply to 1-, 3-, and 6-month GBP and JPY LIBOR from 1 January 2022.
Europe – Derivatives
ICE Transitions Sterling and Euroswiss LIBOR-based Derivatives to SONIA and SARON Ahead of Sterling and Swiss Franc LIBOR Cessation
Intercontinental Exchange, 21 December 2021
Announcing the completion of the LIBOR Transition Fallback plan announced by ICE Futures Europe on 22 March 2021 following its 21 October 2020 Circular 20/150 Consultation Transition Plans for LIBOR Based Futures Contracts.
Asia & Pacific Rim – Syndicated and Bilateral Loans
FAQs on Transition of Legacy SOR Loan Contracts
Steering Committee for SOR & SIBOR Transition to SORA, 15 December 2021
Providing key facts and data to support bank discussions with corporate customers with legacy SOR loans.
Asia & Pacific Rim – General
Letter to Authorized Institutions re Reform of Interest Rate Benchmarks
Hong Kong Monetary Authority, 23 December 2021
Reporting on the substantial progress in migrating from LIBOR to alternative reference rates and reminding authorized institutions that they should not enter into new LIBOR contracts after 31 December 2021.
Global – General
Transition from LIBOR to Risk-Free Rates (page 57)
International Capital Market Association, 12 January 2022 (First Quarter 2022)
Discussing the use of synthetic LIBOR in “tough legacy” bonds and related transition activity in Europe.
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.
The last 100 days of LIBOR: Episode 6 - The Syndicated Loan Market and CLOs
Webinar, 2 December 2021
David Duffee and Sagi Tamir provide an overview of pricing developments in the syndicated loan market and how those developments may affect CLOs.
