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 IBOR transition 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.
NEWS AND DEVELOPMENTS
United States – Derivatives
Amended Recommendations for Swaptions Impacted by the CCP Discounting Transition to SOFR
ARRC, 11 September 2020
The amended recommendation states that, if counterparties cannot reach an agreement on the exchange of compensation before October 16, 2020, “then the counterparties should amend their legacy swaptions to bring them into scope for ISDA’s Supplement 64 and specify an Agreed Discount Rate consistent with the swaptions’ existing contractual terms.”
United States – General
RFP for Vendor to Publish Forward-Looking SOFR Term Rates
ARRC, 10 September 2020
Seeking to identify a recommended administrator who will be responsible for the calculation and publication of forward-looking SOFR term rates to be published in the first half of 2021 if liquidity in SOFR derivatives markets has developed sufficiently, and also to establish recommended scopes of use for such term rates.
United Kingdom – Loans
Recommendation of Credit Adjustment Spread Methodology for fallbacks in cash market products referencing GBP LIBOR
Bank of England Working Group on Sterling Risk-Free Reference Rates, 10 September 2020
In light of the responses to the December 2019 consultation on credit adjustment spread methodologies, the Working Group recommends the use of the historical five-year median spread adjustment methodology when calculating the credit adjustment spread, which should then be applied to any relevant Sterling Overnight Index Average rate chosen or recommended to replace GBP LIBOR pursuant to contractual fallback and replacement of screen rate provisions following a permanent cessation or pre-cessation trigger in relation to GBP LIBOR.
Securing a SONIA-based sterling loan market
Bank of England Working Group on Sterling Risk-Free Reference Rates, 10 September 2020
A statement from the Sterling Working Group recommending that lenders (a) be ready by the end of September 2020 to offer non-LIBOR linked products to their customers; and include clear contractual arrangements to facilitate conversion of all new or refinanced LIBOR-linked products to SONIA or other alternatives and (b) by the end of March 2021, cease new issuance of all sterling LIBOR-linked loan products expiring after the end of 2021.
Active Transition of GBP LIBOR-Referencing Loans
Bank of England Working Group on Sterling Risk-Free Reference Rates, 10 September 2020
The Working Group provides practical steps that lenders and borrowers can take now to amend existing GBP LIBOR referencing loans.
Survey on RFR Compounding Conventions for the Sterling Loan Market and Aggregated and anonymised summary of results
Bank of England Working Group on Sterling Risk-Free Reference Rates, 1 September 2020
Summarizing the responses received by the Working Group to a June 2020 survey of market participants on compounded risk-free rate conventions in the loan market for Sterling syndicated facilities, multicurrency syndicated facilities where there is a Sterling currency option, and bilateral loans.
United Kingdom – Bonds
Active Transition of GBP LIBOR-Referencing Bonds
Bank of England Working Group on Sterling Risk-Free Reference Rates, 10 September 2020
The Working Group provides guidance on how to transition legacy bond transactions by way of a consent solicitation, and outlines related risks.
Asia and Pacific Rim – General
Keynote Speech by MAS Deputy Managing Director, Jacqueline Loh, re SGD Interest Rate Landscape Changes
Monetary Authority of Singapore, 9 September 2020
“We are at a critical juncture. As market players know, liquidity begets liquidity. The sooner we take steps to front-load this change management process, the more likely we can create a virtuous cycle, which facilitates a smooth transition to SORA.”
Keynote Speech by Steering Committee Chairman, Samuel Tsien, re SGD Interest Rate Landscape Changes
SC-STS, 9 September 2020
Since the start of 2020, despite the unprecedented disruption brought on by the Covid19 outbreak, a tremendous amount of time and effort have been spent to prepare and plan for the transition to SORA. Those accomplishments are summarized.
UPCOMING 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.
SIFMA Compliance and Legal Virtual Forum
Securities Industry and Financial Markets Association, 23-24 September 2020
As part of this two-day conference, Mayer Brown partner Marlon Paz will lead an on-demand session for participants on Broker-Dealer Issues & Considerations Relating to LIBOR Cessation
