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Benchmark reform and transition to risk-free rates archive
 
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UK:
  • October 2019: The Working Group on Sterling Risk-Free Reference Rates published letters to the UK Prudential Regulation Authority, UK Financial Conduct Authority, European Commission and Basel Committee on Banking Supervision regarding regulatory barriers to transition away from LIBOR. These letters request that the issues raised are considered and concrete actions are taken where necessary to ensure a smooth transition reducing risks to safety and soundness from continued reliance on a benchmark that is expected to cease at the end of 2021.
  • October 2019: At its meeting on 2 October, the UK Financial Policy Committee (FPC) stated that in 2019 Q4, the FPC would consider further potential policy and supervisory tools that could be deployed by authorities to reduce the stock of legacy Libor contracts to an irreducible minimum ahead of end-2021.
  • September 2019: In September, Lloyds Bank plc announced a consent solicitation and proposal to the holders of the outstanding £1,000,000,000 Series 2018-3 Floating Rate Covered Bonds due March 2023 (the Series 2018-3 Covered Bonds). The proposal to the holders of the Series 2018-3 Covered Bonds passed. The documentation is available to view here (firewall protected).
  • September 2019: In September, Santander announced a consent solicitation and proposal to the holders of the outstanding HOLMES MASTER ISSUER PLC £250,000,000 Series 1 Class A2 Issue 2017-1 Residential Mortgage-Backed Notes due October 2054 and £300,000,000 Series 1 Class A3 Issue 2018-1 Residential Mortgage-Backed Notes due October 2054. The proposals to the holders of each Series of Notes passed. The Final Terms are available to view here and here.
  • September 2019: The Bank of England “Bank Overground” series is to share internal analysis. Each post summarises a piece of analysis supporting a policy or operational decision; in September 2019, this was on How prepared are the markets for the end of LIBOR?.
  • September 2019: The Loan Market Association (LMA) has published exposure drafts of a compounded SONIA based sterling term and revolving facilities agreement and a compounded SOFR based dollar term and revolving facilities agreement. The documents do not constitute recommended forms of the LMA; they have been published as exposure drafts which are open for comments from market participants. The documents are available to view on the LMA website.
  • August 2019: The £RFR Working Group published minutes from its May meeting (which includes summaries of presentations by potential term rate providers).
  • August 2019: The £RFR Working Group released a Statement on conventions for referencing SONIA in new contracts and a summary of responses to the discussion paper issued in March 2019 seeking feedback from market participants on how to reference SONIA.
  • July 2019: The Working Group on Sterling Risk-Free Reference Rates wrote to the European Insurance and Occupational Pensions Authority (EIOPA) to welcome its decision to add the monitoring of LIBOR transition to their 2019 priorities. The Working Group recognises EIOPA’s planned review of Solvency II in 2020, and would be grateful for further details regarding changes to the Solvency II risk-free reference rate. The letter would welcome EIOPA’s consideration of a pan-European taskforce to address regulatory barriers to LIBOR transition.
  • June 2019: The Bank of England published a discussion paper on the Bank’s own approach to managing collateral referencing LIBOR in the Sterling Monetary Framework with responses sought by 27 September. The paper outlines a number of risk management approaches currently under consideration by the Bank to ensure that it remains well placed to provide liquidity insurance in support of financial stability.
  • June 2019: Last Orders: Calling Time on LIBOR: The Bank of England shared the materials from its joint conference with the FCA and the Working Group on Sterling Risk Free Reference Rates on 5 June. The materials comprise Roadmap published by the Working Group on Sterling Risk Free Reference Rates, Dear CEO Thematic Feedback. Please also see “Selected Speeches” for additional materials.
  • June, 2019: The FSB published Overnight Risk-Free Rates - A User’s Guide. The Guide provides an overview of RFRs, details of how they are calculated, and options on how overnight RFRs can be used in cash products. The FSB aims to encourage adoption of these rates where they are appropriate.
  • May 2019: ISDA launched two new consultations on benchmark fallbacks – one covering adjustments that would apply to fallback rates in the event certain interbank offered rates (IBORs) are permanently discontinued, and another relating to pre-cessation issues for LIBOR and certain other IBORs. The deadline for responses for each consultation is 12 July 2019.
  • May 2019: The Working Group on Sterling Risk-Free Reference Rates published a statement to update on progress in the adoption of SONIA in sterling markets, including work currently underway to develop a forward-looking term benchmark.
  • March 2019: The FSB’s Official Sector Steering Group sent a letter to ISDA encouraging ISDA to ask for market opinion on the addition of other trigger events, the timing for an ISDA consultation on U.S. dollar LIBOR and certain other IBORs and the governance and transparency necessary as ISDA makes its final decisions.
  • March 2019: IBA released the results of its Survey on the Use of LIBOR from December 2018, which sets out to identify the LIBOR settings that are most widely used.
  • March 2019: The Working Group on Sterling Risk-Free Reference Rates published a Discussion Paper: Conventions for referencing SONIA in new contracts and updated webpage: Transition to sterling risk-free rates from Libor. This Discussion Paper is addressed to market participants who are considering how to reference SONIA in new contracts and it is intended to raise market awareness of the identified conventions for referencing SONIA.
  • March 2019: The FCA published a statement clarifying its approach to, among other things, the EU Benchmarks Regulation if the UK leaves the EU without an implementation period (a no-deal scenario). The statement notes that the FCA will be setting up a UK public register of benchmarks and administrators authorised in the UK.
Euro area:
  • November 2019: The working group on euro risk-free rates released a report on €STR fallback arrangements. The purpose of this report is to provide supervised entities with guidance on potential ways to comply with Article 28.2 of the EU Benchmarks Regulation (BMR) when using the euro short-term rate (€STR), as the euro risk-free rate, in contracts.
  • November 2019: The working group on euro risk-free rates released a report on the financial accounting implications of the transition from EONIA to the €STR, and the introduction of €STR-based fallbacks for EURIBOR. The report primarily focuses on the EU Benchmarks Regulation (BMR) implications for hedge accounting related topics, and challenges for non-hedge related topics, and sets out relevant key recommendations.
  • November 2019: The working group on euro risk-free rates released high level recommendations for fallback provisions in contracts for cash products and derivatives transactions referencing EURIBOR. The working group recommends that market participants consider incorporating fallback provisions in all new financial instruments and contracts referencing EURIBOR, regardless of whether they fall within the scope of the BMR.
  • October 2019: To enable a smooth transition from EONIA to €STR, the working group on euro risk-free rates made available a communication toolkit, providing material which interested parties can use in their own communication and education efforts. The toolkit consists of: (i) frequently asked questions dated 17 October 2019; (ii) a standard set of slides; and (iii) a checklist.
  • October 2019: In October, the Euro RFR WG published its report on the risk management implications of the transition from EONIA to the €STR and the introduction of €STR-based fallbacks for EURIBOR. The report focuses mainly on the risk management implications for banks, but also touches on additional challenges facing the asset management and insurance sectors. It should be read in conjunction with Recommendations of the working group on euro risk-free rates on the EONIA to €STR legal action plan and Report by the working group on euro risk-free rates on the impact of the transition from EONIA to the €STR on cash and derivatives products.
  • October 2019: On 2 October, the European Investment Bank (‘EIB’) printed the market’s first €STR benchmark with a EUR 1bn 3-year bond. The transaction was announced on 19 September, ahead of the first €STR publication date (2 October for 1 October fixings) in order to give investors sufficient time to prepare.
  • October 2019: From 2 October, 2019, €STR (the new Euro RFR) is being published, reflecting trading activity from the previous day. Alongside this, EMMI has for the first time published EONIA (for 1 October) under the reformed determination methodology (€STR + 8.5bp). EMMI also announced that it has now applied for authorisation of EONIA from the Belgian FSMA, under Article 34 of the EU BMR.
  • September 2019: Videos and presentations of the ECB’s second roundtable on euro risk-free rates on Wednesday 25 September are available on the ECB’s website.
  • September 2019: The ECB are hosting their second roundtable on euro risk-free rates on Wednesday 25 September from 09:00 to 13:00 CET at the ECB in Frankfurt.
  • August 2019: The ECB's working group on euro risk-free rates published a report on the impact the transition from the euro overnight index average (EONIA) to the euro short-term rate (€STR) will have on cash and derivatives products. Market participants will need to prepare for this benchmark rate change (for example, adapting IT systems and reviewing documents and procedures) and the report analyses the implications of the transition and provides recommendations to help with the change.
  • July 2019: EMMI published the EURIBOR benchmark statement.
  • July 2019: The final recommendations on the EONIA to €STR legal action plan for the transition from EONIA to €STR were published, together with an associated press release.
  • July 2019: A letter to the International Accounting Standards Board (IASB) from the Chair of the Working Group on Euro Risk-Free Rates was published.
  • July 2019: An updated version of the explainer on benchmark rates was made available on the ECB website.
  • July 2019: The ECB announced that the publication time for €STR will be 8am CET (instead of the previously anticipated 9am CET). If errors are detected following the publication of €STR that affect €STR by more than 2 basis points, the ECB will revise and re-publish €STR on the same day at 9am CET.
  • July 2019: ESMA published updated Q&As on the Benchmark Regulation.
  • July 2019: EMMI was granted authorisation for the administration of EURIBOR from the Belgian FSMA.
  • July 2019: The Euro RFR Working Group published a call to benchmark administrators for expressions of interest in producing a €STR-based forward-looking term structure. Five administrators duly responded to the Working Group’s call and their presentations are available on the ECB’s website.
  • July 2019: The ECB sent out a Dear CEO Letter to significant institutions with a deadline for responses by 31 July to supply a board-approved summary of key risks relating to benchmark reform and a detailed action plan to mitigate such risks, address pricing issues, and implement process changes, as well as contact points at management level who are in charge of overseeing the implementation of these action plans. In addition they have asked for a reply to a detailed questionnaire attached to the letter by 15 September.
  • May 2019: EMMI published the results of its consultation, confirming that the EONIA methodology will change to €STR plus spread on 2 October 2019. EONIA is expected to be discontinued on 3 January 2022. The results of the consultation and EMMI’s press release are available here.
  • May 2019: The ECB announced a one-off spread between €STR and EONIA, to be used by EMMI in the new EONIA methodology as of October 2019. The methodology used to calculate the spread (which will be 8.5bp) is based on the recommendations of the working group on euro risk-free rates published on 14 March.
  • May 2019: The Working group on euro risk-free rates has launched a public consultation and associated press release on a legal action plan for the proposed transition from EONIA to €STR, including a set of draft recommendations which address the legal implications for new and legacy contracts referencing EONIA.
  • May 2019: EMMI, the administrator of the EURIBOR benchmark, announced that it has applied for authorisation from the Belgian FSMA under EU BMR. As a subsequent step, EMMI has started transitioning Panel Banks from the current EURIBOR methodology to the new hybrid methodology.
  • March 2019: The European Money Markets Institute (EMMI) released a public consultation on the recommendations for EONIA of the working group on euro risk-free rates, together with an accompanying press release.
  • March 2019: The ECB issued a press release confirming that it will start publishing €STR as of 2 October 2019 and that it will provide the computation of a one-off spread between €STR and EONIA, as requested by the €RFR WG and calculated by the ECB according to the methodology publicly recommended by the € Risk Free Rate Working Group.
  • March 2019: The working group on euro risk free rates has endorsed recommendations to market participants regarding (i) the transition from EONIA to €STR; and (ii) the calculation of a €STR-based term structure.
  • February 2019: The working group on euro risk-free rates published a summary of responses to the second public consultation on determining an ESTER-based term structure methodology as a fallback in EURIBOR-linked contracts.
  • February 2019: The working group on euro risk-free rates published a summary of responses to its report on the transition from EONIA to ESTER.
  • January 2019: The working group on euro risk-free rates published guiding principles for fallback provisions in new contracts for euro-denominated cash products and an associated press release.
US:
  • September 2019: The Alternative Reference Rates Committee (ARRC) updated its previously released set of frequently asked questions (FAQs). The FAQs are updated from time to time to reflect developments, provide information about the work of ARRC, its progress to date, and the overall effort to promote voluntary market adoption of SOFR, its recommended alternative to U.S. dollar LIBOR.
  • September 2019: The Alternative Reference Rates Committee (ARRC) today released a practical implementation checklist to help market participants transition to using the SOFR, the ARRC’s recommended alternative to USD LIBOR. The information in the checklist is expected to be especially helpful for market participants that have not fully started taking the steps needed to transition away from LIBOR.
  • July 2019: The SEC published a staff statement on LIBOR transition dated 12 July 2019 encouraging market participants to manage transition away from LIBOR and providing guidance in specific areas.
  • May 2019: The Alternative Reference Rates Committee (ARRC) has published recommended contractual fallback language for USD LIBOR denominated bilateral business loans and securitisations. Further information can be found in the ARRC’s press release.
  • May 2019: The Alternative Reference Rates Committee (ARRC) issued SOFR: A Year in Review to commemorate the one-year anniversary of the publication of the Secured Overnight Financing Rate (SOFR). SOFR is the rate that the ARRC selected as its preferred alternative to U.S. dollar LIBOR.
  • April 2019: The ARRC released recommended contractual fallback language for USD-denominated floating rate notes and syndicated loans. The fallbacks are for market participants’ voluntary use in new contracts that reference USD LIBOR and were developed with the goal of reducing the risk of serious market disruption in the event that LIBOR is no longer usable.
  • April 2019: The ARRC published a User’s Guide to SOFR. Intended to help explain how market participants can use SOFR in cash products, the User’s Guide lays out a number of considerations that market participants will need to consider, such as simple average or compounded in advance or in arrear, and the conventions pertaining to all.
  • April 2019: ISDA published a letter to the FSB's Official Sector Steering Group Derivative contract robustness to risks of interest rate benchmark discontinuation to provide an update on the status of their work to implement more robust fallbacks for derivatives referencing key interbank offered rates and key milestones over the next year.
  • April 2019: IBA issued a press release providing an update on their proposed U.S. Dollar ICE Bank Yield Index.
  • March 2019: The ARRC published its Feb-March 2019 Newsletter providing an update on key news relating to risk-free rates transition in the US and global markets.
  • March 2019: The ARRC launched an enhanced version of its website in the interest of providing comprehensive information about, and facilitating the public's understanding of the ARRC and its work in supporting a successful transition away from USD LIBOR to a more robust reference rate, its recommended alternative, the SOFR.
Global:
  • November 2019: ICE Benchmark Administration published a feedback statement on possible enhancements to ICE Swap Rate.
  • October 2019: ISDA released the Interest Rate Benchmarks Review, which analyses trading volumes of interest rate derivatives (IRD) transactions in the US referencing SOFR and other selected alternative risk-free rates, including SONIA, SARON and TONA. In In addition, the report analyses IRD traded notional referencing the LIBOR denominated in US dollars, sterling, Swiss franc, yen, euro, as well as EURIBOR and TIBOR.
  • October 2019: On 11 October, the European Commission published its anticipated consultation on a review of the Benchmarks Regulation, two years after its entry into application. The consultation closes on 6 December 2019. The objective of the consultation is to gather stakeholders’ feedback on the functioning of the EU benchmarks regime, two years after its entry into application. The consultation focuses primarily on a number of topics the Benchmark Regulation itself puts forward for review, such as the regime for critical benchmarks and the effectiveness of the mechanism for authorisation and registration of EU benchmark administrators. Broader topics are also explored, such as the categorisation of benchmarks and the rules for third country benchmarks.
  • October 2019: On 21 October, ISDA published an Anonymized Narrative Summary of Responses to the ISDA Pre-Cessation Consultation. A significant majority of respondents stated that generally they would not want to continue referencing a covered IBOR in future derivative contracts following a public statement by a regulator that such IBOR was no longer representative. A smaller majority of respondents replied that generally they would not be content to continue referencing an unrepresentative covered IBOR in legacy contracts following such a statement. However, a notable portion of this majority explained that despite this position, they might nonetheless continue to reference an unrepresentative covered IBOR in certain circumstances. A minority of respondents stated that they would continue to reference an unrepresentative covered IBOR in legacy derivative contracts following a statement by a regulator that such an IBOR is no longer representative. These respondents offered a variety of rationales for this choice, including that they would only take such an approach if no other viable alternative existed, others that would continue referencing an unrepresentative covered IBOR said they would do so to avoid creating a mismatch, and others suggested that only a permanent cessation trigger should be utilized for fallbacks.
  • September 2019: The International Accounting Standards Board (IASB) has amended some of its requirements for hedge accounting. The amendments are designed to support the provision of useful financial information by companies during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as IBORs.
  • September 2019: ISDA released a Consultation on Final Parameters for the Spread and Term Adjustments in Derivatives Fallbacks for Key IBORs. The deadline for responses is 23 October 2019.
  • August 2019: ISDA released a statement regarding the preliminary results of its consultation on pre-cessation issues. This consultation followed a request by the (FSB OSSG) for ISDA to request comment on the events that should trigger a move to a spread-adjusted fallback rate for LIBOR. The results show no clear consensus from the 89 market participants respondents as to the question of whether there should be a pre-cessation trigger based on “unrepresentativeness”.
  • July 2019: ISDA announced that Bloomberg Index Services Limited (BISL) has been selected to calculate and publish adjustments related to fallbacks that ISDA intends to implement for certain interest rate benchmarks in its 2006 ISDA Definitions.
  • July 2019: IOSCO has published a statement setting out matters for market participants to consider if they have exposure to LIBOR, particularly USD LIBOR, in light of its expected cessation after the end of 2021 and USD LIBOR’s widespread global use. The key messages from the statement are: RFRs provide a robust alternative to IBORs and can be used in the majority of products; in both new and existing IBOR contacts, the inclusion of robust fallbacks should be considered a priority; the best risk mitigation to a LIBOR cessation event is moving to RFRs now; and it is prudent risk management for market participants to engage early in the LIBOR transition process in preparation for the cessation of LIBOR post-2021.
  • July 2019: ISDA published a statement summarising the preliminary results of a supplemental consultation on adjustments that would apply to fallback rates in the event certain interbank offered rates (IBORs) are permanently discontinued.
  • Switzerland, February 2019: The National Working Group on Swiss Franc Reference Rates, which is the key forum for considering proposals to reform reference interest rates in Switzerland, has published a starter pack designed to inform readers about the transition from CHF LIBOR to SARON.



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

ICMA materials



Official materials


Selected speeches
Statements and other publications
  • UK, December 2018: The Working Group on Sterling Risk-Free Reference Rates published a Next Steps document related to LIBOR transition and the development of a term rate based on SONIA. This follows other publications related to term SONIA reference rates detailed below.
  • UK, November 2018: The Working Group on Sterling Risk-Free Reference Rates published a starter pack called “Preparing for 2022: What you need to know about LIBOR transition”, which is designed to inform readers about the transition from LIBOR to SONIA and may be updated periodically to reflect relevant developments. Interested parties are encouraged to use the pack when engaging with internal and external stakeholders on the topic.
  • UK, November 2018: The Working Group on Sterling Risk-Free Reference Rates published a summary of responses to the consultation on term SONIA reference rates.
  • Global, November 2018: The FSB published a progress report on reforming major interest rate benchmarks, together with a press release.
  • Euro area, November 2018: The ECB held a roundtable on euro risk-free rates.
  • UK, September 2018: The UK Financial Conduct Authority and Prudential Regulation Authority wrote letters to CEOs of major banks and insurers supervised in the UK asking for the preparations and actions they are taking to manage transition from LIBOR to alternative interest rate benchmarks.
  • US, September 2018: The Alternative Reference Rates Committee (ARRC) published frequently asked questions and an associated press release to build on efforts to engage and educate market participants and other stakeholders.
  • Euro area, September 2018: The private sector working group on euro risk-free rates recommended ESTER as the euro risk-free rate.
  • Global, September 2018: ISDA Benchmarks Supplement, associated FAQ and press release
  • UK, July 2018: The Working Group on Sterling Risk-Free Reference Rates published a paper on new issuance of Sterling bonds referencing Libor.
  • UK, July 2018: The Working Group on Sterling Risk-Free Reference Rates published a consultation on term SONIA reference rates, together with a press release
  • Global, July 2018: ISDA consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW
  • Global, July 2018: The Financial Stability Board published a statement on interest rate benchmark reform – overnight risk-free rates and term rates, together with a press release.
  • US, July 2018: The Alternative Reference Rates Committee (ARRC) published non-binding guiding principles for consideration when drafting LIBOR fallback language for cash products, together with a press release.
  • UK, June 2018: The Working Group on Sterling Risk-Free Reference Rates published a provisional timeline with milestones for RFR transition in sterling markets.
  • US, March 2018: The Alternative Reference Rates Committee (ARRC) published its Second Report which discusses a “Paced Transition Plan”.



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

ICMA materials



Official materials

Selected speeches
  • Speech given by Andrew Bailey, Chief Executive of the FCA, at Bloomberg, London on 27 July 2017: The future 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