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Benchmark reform and transition to risk-free rates
ICMA has been engaging with regulators and members on the global issue of benchmark reform for several years.

Most recently, ICMA’s focus is the development of Risk-Free Reference Rates (RFRs), which are being developed in response to recommendations by the Financial Stability Board (FSB) made to increase confidence in the reliability and integrity of interest rate benchmarks.

In particular, ICMA is a member of the Working Group on Sterling Risk-Free Reference Rates, with Paul Richards (Head of Market Practice and Regulatory Policy, ICMA) chairing a sub-group focusing on benchmark transition issues in bond markets. ICMA is also a non-voting member of the Working group on euro risk-free rates established by the ECB, the Belgian Financial Services and Markets Authority, ESMA and the European Commission. ICMA also participates in the National Working Group on Swiss Franc Reference Rates.

Set out below are links to ICMA and official sector information and materials on this topic.
 
 
ICMA materials
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Official materials

Selected speeches
  • UK, November 2019: Edwin Schooling Latter, Director of Markets and Wholesale Policy, delivered a speech at the Risk.net LIBOR Summit, London, in which he stated that the key next steps in reducing the risks from continued use of the LIBOR benchmark include ending use of LIBOR in new sterling loans from Q3 2020, and making it standard to quote based on SONIA in sterling swap markets. He also describes in the speech how LIBOR could cease or fail the Benchmarks Regulation ‘representativeness’ test at end-2021, and how robust contractual fall back triggers can protect market participants from risks in both scenarios.
  • Euro area, October 2019: Steven Maijoor of ESMA discussed ESMA’s role under the BMR and more generally in the global reform of interest rates. He said: “There is a clear commitment by the administrator of EURIBOR and the public sector to sustain EURIBOR and the work will continue in the next years to ensure that the panel of banks contributing to EURIBOR is stable and representative. … Just as for all benchmarks authorised under the Regulation, fallback clauses are needed for EURIBOR too. This is because users, and their clients, should be able to know in advance what will happen to their contracts if EURIBOR ceases to be provided.”
  • US, September 2019: John Williams of the Federal Reserve Bank of New York gave a speech at the US Treasury Market Conference: LIBOR: The Clock is Ticking.
  • US, July 2019: Andrew Bailey spoke at the SIFMA LIBOR Transition Briefing in New York. John Williams of the Federal Reserve Bank of New York spoke at the same event: 901 days.
  • UK, June 2019: Andrew Hauser gave a speech on 27 June at Risk Live: Join the revolution! Why it makes business sense to move on from LIBOR.
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Statements and other publications


UK:
  • January 2020: IBA launched a consultation on the introduction of an ICE Swap Rate based on SONIA. (ICE Swap Rate represents the mid-price for interest rate swaps (the fixed leg), at particular times of the day, in EUR, GBP and USD and in tenors ranging from 1 year to 30 years. ICE Swap Rate is used for various purposes, including in some bonds.) The consultation focuses on the introduction of a new suite of ICE Swap Rate tenors which will have SONIA as the floating leg. Comments are invited by 20 March 2020.
  • January 2020: The Working Group on Sterling Risk-Free Reference Rates, the Bank of England and FCA published a set of documents, outlining priorities and milestones for 2020 on LIBOR transition and emphasizing the need for firms to accelerate efforts to ensure they are prepared for LIBOR cessation by end-2021. A press release entitled “Next steps for LIBOR transition in 2020: the time to act is now” is also available. The package includes:
    • The Working Group's priorities and roadmap for 2020.
    • The use cases of benchmark rates: compounded in arrears, term rate and further alternatives: This paper sets out the Working Group’s views on the appropriate use of SONIA compounded in arrears for businesses and clients, and guidance for where the use of alternative approaches, such as a Term SONIA Reference Rate, may be necessary. In relation to the bond market, it notes that overnight SONIA compounded in arrears has become the market norm for floating rate sterling bonds and there is strong liquidity developing for securitisations that reference overnight SONIA compounding in arrears.
    • Progress on the transition of LIBOR-referencing legacy bonds to SONIA by way of consent solicitation: This paper highlights the progress on the transition of LIBOR-referencing legacy bonds to SONIA by way of consent solicitation and sets out six considerations  “lessons learned” from recent conversions of legacy LIBOR bonds to SONIA.  
    • Factsheet - Calling time on LIBOR: Why you need to act now: This is a high-level (1-page) factsheet with sections “What’s happening?”, “What do I need to do?” and “Where can I find more information?”
    • The Working Group’s consultation (published in December) on credit adjustment spread methodologies for cash products, seeking feedback by 6 February 2020, is highlighted again on the Working Group’s webpage. The paper considers four methodologies that could be used to calculate the credit adjustment spread for fallback language in sterling cash instruments.
    • FCA and Bank of England statement regarding a switch from LIBOR to SONIA for sterling interest rate swaps: This FCA and Bank of England statement encourages market makers to switch the convention for sterling swaps from LIBOR to SONIA on 2 March 2020.
    • PRA and FCA letter to Senior Managers – Next steps on LIBOR transition: This is a joint letter from the PRA and FCA to major banks and insurers setting out initial expectations of firms’ transition progress during 2020. It emphasizes that 2020 will be a key year in the transition away from LIBOR and highlights the Working Group’s 2020 targets for 2020. It states that LIBOR transition plans should include the targets in project milestones and ensure that management information is available to track progress. As a guide, the FCA and PRA consider that action in the following areas is key to delivery: (a) product development; (b) reviewing infrastructure, including updating loan system capabilities; (c) client communications and awareness; and (d) updating documentation. The FCA and the PRA will step up engagement with firms on LIBOR transition through their regular supervisory relationship, reviewing firms’ management information and collecting data from firms to assess progress. There is also an appendix detailing progress made in 2019.
  • December 2019: The Working Group on Sterling Risk-Free Reference Rates published its monthly Newsletter. This one page document provides a high level summary of market and official sector developments in the sterling market but also highlights related initiatives across the globe. Previous editions are available on the Bank of England website.
  • December 2019: The Working Group on Sterling Risk-Free Reference Rates opened invitations to join three new task forces focusing on (i) frameworks to support transition of legacy cash products, (ii) providing market input regarding the “tough legacy” products that may prove unable to be converted or amended to include robust fallbacks and (iii) enablers to moving new loans issuance away from GBP LIBOR.
  • December 2019: the Deputy Governor of the PRA responded to a letter from Working Group on Sterling Risk-Free Reference Rates regarding regulatory capital impediments to IBOR transition. This response states, inter alia, that in relation to AT1 and Tier 2 Capital, the PRA does not believe it is desirable to reassess the eligibility of instruments where the amendments are solely to replace the benchmark reference rate. The PRA has made the point at the Basel Committee on Banking Supervision and is making progress towards achieving an internationally consistent response. The PRA also noted that its rules on Contractual Recognition of Bail-In and Stay in Resolution could be considered relevant where legacy contracts are judged to have been materially amended. The PRA is considering possible implications of benchmark rate reform for those rules and plans to provide an update in spring 2020.
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Euro area:

  • December 2019: EMMI published the EONIA benchmark statement.
  • December 2019: EMMI confirmed that it has been granted an authorisation by the Belgian Financial Services and Markets Authority for the provision and administration of EONIA under Article 34 of the EU Benchmarks Regulation. Consequently, EONIA can continue to be used until 3 January 2022, the date on which the benchmark will be discontinued.
  • December 2019: A timeline detailing deliverables of the working group on euro risk free rates for H1 2020 is available.
  • December 2019: The working group on euro risk-free rates released a newsletter which covers recent working group updates, publications and information on the launch of the €STR.
  • November 2019: EMMI confirmed that it has successfully completed the phase-in of all panel banks to the EURIBOR hybrid methodology.
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US:

  • January 2020: The ARRC released a consultation on spread adjustment methodologies for cash products referencing USD LIBOR. These spread adjustments are intended for use in USD LIBOR contracts that have incorporated the ARRC’s recommended hardwired fallback language, or for legacy USD LIBOR contracts where a spread-adjusted SOFR can be selected as a fallback.
  • November 2019: The ARRC published a summary of its LIBOR fallback language for floating rate notes, bilateral business loans, syndicated loans, securitizations and residential adjustable rate mortgages.
  • November 2019: The ARRC produced its October/November 2019 newsletter.
  • November 2019: The ARRC released an Appendix to the SOFR FRNs Conventions Matrix. The Matrix, which was issued in August 2019, identifies considerations relevant to using SOFR – the ARRC’s recommended alternative to USD LIBOR – in new FRNs and supplements the ARRC’s paper “A User’s Guide to SOFR,” which the ARRC released in April 2019. In conjunction with the Matrix, the ARRC had also released the SOFR FRNs Comparison Chart, which outlines conventions already being used in the market. The Appendix builds upon these documents and is intended as an additional resource for market participants to consider.
  • November 2019: In order to support a successful transition away from USD LIBOR, and as administrator of SOFR, the New York Fed, in cooperation with the Treasury Department’s Office of Financial Research (OFR), requests comments on a proposal to publish daily three compounded averages of SOFR with tenors of 30-, 90-, and 180-calendar days, and to publish daily a SOFR index that would allow the calculation of compounded average rates over custom time periods. Comments should be submitted to the New York Fed by December 4, 2019. This development has been welcomed by the ARRC.
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Japan:
  • December 2019: The Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks closed the call for applications following the release of a statement soliciting potential future administrators of JPY term reference rates in October 2019.
  • November 2019: The Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks published a report on the results of its consultation on JPY interest rate benchmarks on 29 November. A summary of the main points and press release is also available.
  • August 2019: The Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks established and held a first meeting of a Task Force on Term Reference Rates.
Asia Pacific:
  • September 2019: The Executives' Meeting of East Asia-Pacific (EMEAP) Working Group on Financial Markets has released a Study on Implications of Financial Benchmark Reforms, which aims to raise market awareness and further enhance market readiness for financial benchmark reforms. The Study focuses on the implications of LIBOR discontinuation, EU Benchmarks Regulation (BMR) and reform of local benchmarks in the EMEAP region.
Global:
  • January 2020: ISDA published its interest rate benchmarks review, full year 2019 and Q4 2019, which analyses trading volumes of interest rate derivatives (IRD) transactions in the US referencing certain RFRs and certain IBORs.
  • January 2020: The European Commission published its endorsement of the IASB phase 1 IBOR amendments in the EU Official Journal. These amendments address the financial reporting consequences of the interest rate benchmark reform in the period before the replacement of an existing interest rate benchmark with an alternative reference rate.
  • December 2019: The Financial Stability Board published its annual progress report on implementation of recommendations to reform major interest rate benchmarks. The report emphasises that the continued reliance of global financial markets on LIBOR poses risks to financial stability and calls for significant and sustained efforts by the official sector and by financial and non-financial firms across many jurisdictions to transition away from LIBOR by end-2021.
  • December 2019: ISDA has launched a supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing euro LIBOR and EURIBOR in the event those benchmarks are permanently discontinued. The consultation also covers technical issues related to the adjustment methodology, and seeks feedback on whether the adjustments would be appropriate for lesser-used IBORs if ISDA implements fallbacks for those benchmarks in the future. The deadline is 21 January 2020.
  • November 2019: ISDA has responded to the FSB's letter relating to pre-cessation triggers for derivatives. Among other things, the letter calls for greater clarity on certain issues to assist market participants in understanding the implications of a "non-representative" LIBOR.
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General information and materials:



Contacts:

Paul Richards
Managing Director, Head of Market Practice and Regulatory Policy; Member of ICMA's Executive Committee  
Direct line: +44 20 7213 0315

David Hiscock
Managing Director, Deputy Head, Market Practice and Regulatory Policy; focused on general regulatory policy and ICMA’s buy-side members; secretary to the ICMA Regulatory Policy Committee and to the ICMA Asset Management and Investors Council (AMIC) and related groups.
Direct line: +44 20 7213 0321

Katie Kelly
Senior Director, Market Practice and Regulatory Policy; Secretary to the ICMA Financial Institution Issuer Forum (FIIF) and to the ICMA Corporate Issuer Forum (CIF).
Direct line: +44 20 7213 0331

Charlotte Bellamy
Senior Director, Market Practice and Regulatory Policy; secretary to the ICMA Legal & Documentation Committee (LDC) and related groups.
Direct line: +44 20 7213 0340

January 2020
ICMSA Bulletin 200120/47 – Benchmark replacement and fallback provisions – Key principles and guidelines for agents and trustees

18 January 2019
ICMSA Bulletin 190118/45: The discontinuation of LIBOR/IBORS - implications for English-law agency roles

1 November 2018
ICMA and SIX Joint Conference - LIBOR to SARON: Are you ready?
Presentations given at this event are available on the ICMA event webpage.

18 October 2018
ICMSA Bulletin 81018/44: Implications for English law Trustees on discontinuation of LIBOR/IBORs

15 February 2017
ICMA response to the ICE Benchmark Administration Limited Additional Consultation on ICE LIBOR Evolution

31 March 2016
ICMA response to ESMA Discussion Paper on Benchmarks Regulation

29 January 2016
ICMA response to EMMI Consultative Position Paper on the Evolution of Euribor

16 October 2015
ICMA response to the ICE Benchmark Administration Limited Second Position Paper on the Evolution of ICE LIBOR

19 September 2014
ICMA response to the ICE Benchmark Administration Error Policy Consultation

29 November 2013
ICMA response to to ILOC / BBALIBOR Joint Consultation Paper on LIBOR Re-fixing

16 May 2013
ICMA response to IOSCO’s consultation on "Principles for Financial Benchmarks"

11 February 2013
ICMA response to IOSCO’s consultation on "Financial Benchmarks"
ICMA response to ESMA-EBA’s joint consultation on “Principles for Benchmark Setting Processes in the EU”

6 December 2012
ICMA response to the BBA’s consultation on "Strengthening LIBOR"

27 November 2012
ICMA response to the European Commission’s "Consultation Document on the Regulation of Indices"

7 September 2012
ICMA submission in relation to the August 2012 initial discussion paper “The Wheatley Review of LIBOR”




Contacts:

Paul Richards
Managing Director, Head of Market Practice and Regulatory Policy; Member of ICMA's Executive Committee  
Direct line: +44 20 7213 0315

David Hiscock
Managing Director, Deputy Head, Market Practice and Regulatory Policy; focused on general regulatory policy and ICMA’s buy-side members; secretary to the ICMA Regulatory Policy Committee and to the ICMA Asset Management and Investors Council (AMIC) and related groups.
Direct line: +44 20 7213 0321

Katie Kelly
Senior Director, Market Practice and Regulatory Policy; Secretary to the ICMA Financial Institution Issuer Forum (FIIF) and to the ICMA Corporate Issuer Forum (CIF).
Direct line: +44 20 7213 0331

Charlotte Bellamy
Senior Director, Market Practice and Regulatory Policy; secretary to the ICMA Legal & Documentation Committee (LDC) and related groups.
Direct line: +44 20 7213 0340

25 June 2018
IBOR Global Benchmark Report 2018
Download the press release

1 February 2018
IBOR Global Benchmark Survey 2018 Transition Roadmap
Download the press release

31 January 2018
Joint trade association letter to the FSB regarding implementation of risk free rates and transition away from LIBOR: key issues for the global financial markets




Minutes of LIBOR Trade Association Working Party Meetings

27 January 2020
Minutes of the January 2020 LIBOR Trade Association Working Party meeting

13 January 2020
Minutes of the November 2019 LIBOR Trade Association Working Party meeting

20 December 2019
Minutes of the October 2019 LIBOR Trade Association Working Party meeting

14 October 2019
Minutes of the September 2019 LIBOR Trade Association Working Party meeting

10 July 2019
Minutes of the July 2019 LIBOR Trade Association Working Party meeting

5 June 2019
Minutes of the June 2019 LIBOR Trade Association Working Party meeting

2 May 2019
Minutes of the May 2019 LIBOR Trade Association Working Party meeting

28 March 2019
Minutes of the March 2019 LIBOR Trade Association Working Party meeting

28 February 2019
Minutes of the February 2019 LIBOR Trade Association Working Party meeting

24 January 2019
Minutes of the January 2019 LIBOR Trade Association Working Party meeting

17 December 2018
Minutes of the December 2018 LIBOR Trade Association Working Party meeting

15 November 2018
Minutes of the November 2018 LIBOR Trade Association Working Party meeting

10 October 2018
Minutes of the October 2018 LIBOR Trade Association Working Party meeting

10 September 2018
Minutes of the September 2018 LIBOR Trade Association Working Party meeting




Contacts:

Paul Richards
Managing Director, Head of Market Practice and Regulatory Policy; Member of ICMA's Executive Committee  
Direct line: +44 20 7213 0315

David Hiscock
Managing Director, Deputy Head, Market Practice and Regulatory Policy; focused on general regulatory policy and ICMA’s buy-side members; secretary to the ICMA Regulatory Policy Committee and to the ICMA Asset Management and Investors Council (AMIC) and related groups.
Direct line: +44 20 7213 0321

Katie Kelly
Senior Director, Market Practice and Regulatory Policy; Secretary to the ICMA Financial Institution Issuer Forum (FIIF) and to the ICMA Corporate Issuer Forum (CIF).
Direct line: +44 20 7213 0331

Charlotte Bellamy
Senior Director, Market Practice and Regulatory Policy; secretary to the ICMA Legal & Documentation Committee (LDC) and related groups.
Direct line: +44 20 7213 0340