2021
2020
2019
2018
2017
Official and other key materials

Statements and other publications

UK:
  • May 2021: The FCA and the Bank of England released a statement in which they encourage market participants in a switch to SONIA in the sterling exchange traded derivatives market from 17 June.
  • May 2021: ICE Benchmark Administration (IBA) has released a consultation on potential cessation of the ICE Swap Rate based on GBP LIBOR. IBA does not expect to be able to continue to publish GBP LIBOR ICE Swap rate settings for which the 3m or 6m GBP LIBOR settings serve as the underlying rate for the floating leg of the relevant swap transaction after 31 December 2021, because IBA does not expect sufficient (or perhaps any) input data to be available based on eligible new interest rate swap transactions referencing GBP LIBOR settings from this time. IBA is therefore seeking feedback on its intention to cease the publication of GBP LIBOR ICE Swap Rate for all tenors immediately after publication on 31 December 2021. The consultation closes on Friday 4 June 2021.
  • May 2021: HM Treasury has released the outcome of the Consultation on supporting the wind-down of critical benchmarks, and has responded to the Chair of the RFRWG. The outcome, as reflected in the response, stresses that the Government intends to bring forward further legislation, when the parliamentary time allows it, to address issues in the Consultation, and that it remains the view of the Treasury that, wherever possible, parties should seek to transition contracts away from LIBOR ahead of the end of 2021.
  • May 2021: The Sterling Risk-Free Rate Working Group newsletter for March 2021 is available to view here.
  • April 2021: The RFRWG released a paper on Active transition of legacy GBP LIBOR contracts, in which it stresses that, in the RFRWG’s view, existing fallback provisions, unless they are contractually robust and specifically anticipate the envisaged end of GBP LIBOR, should not be relied upon as a primary method of transition from GBP LIBOR to SONIA or alternative reference rates. It also notes that, for the GBP bond market, issuers and investors should be aware of potentially long lead times in consent solicitations and capacity constraints, and are encouraged to prioritise accordingly.
  • April 2021: The Chair of the Working Group wrote to HM Treasury, seeking an update on whether the Government intends to introduce safe harbour protections to reduce the risk of contractual uncertainty and disputes that may arise from the transition of tough legacy contracts. The letter also requests an indication of the proposed timing and possible legislative vehicles which may be used in order to provide reassurance that these protections can be put into place ahead of the end 2021 deadline.
  • April 2021: The FMSB published a Spotlight Review ‘LIBOR transition: Case studies for navigating conduct risks in back book transition’ and an accompanying press release. The Spotlight Review aims to provide practical guidance for how market participants may manage potential conduct risks arising in back book transition and builds on a previous Spotlight Review which focused on moving new business off LIBOR - LIBOR transition: Case Studies for navigating conduct risks, published by FMSB in June 2020.
  • April 2021: The Sterling RFRWG released a paper on Transition from LIBOR in sterling structured products. The paper describes how a sterling structured products market based on a risk-free rate could potentially be designed using compounded in arrears SONIA, and sets out considerations for the transition of existing sterling structured products from GBP LIBOR to SONIA.
  • April 2021: The Sterling Risk-Free Rate Working Group newsletter for March 2021 is available to view here.
  • March 2021: The FCA and the PRA issued a joint letter to the CEOs of supervised firms setting out supervisory expectations of the transition from LIBOR to risk free rates, and a list of priority areas where further action by firms is necessary. For the bond market, this includes intensifying “efforts to execute plans to transition the stock of legacy LIBOR-linked contracts ahead of confirmed cessation dates of panel bank LIBOR, wherever it is feasible to do so”. The letter also states that “As the time for remaining action is short and reducing in every LIBOR currency, action needs to be front-loaded to deliver demonstrable progress against a risk-based prioritisation of contracts”.
  • March 2021: The RFRWG has published a summary of responses to its Consultation on successor rate to GBP LIBOR in legacy bonds referencing GBP LIBOR. The responses conclude that it would be helpful for the RFRWG, in its capacity as a relevant nominating body, to make a recommendation on the successor rate to GBP LIBOR for the purposes of the operation of Type 2 and Type 3 fallbacks in bond documentation, and that the recommended successor rate should be overnight SONIA, compounded in arrears. The responses further conclude that any further detail on the conventions to be used to accompany the recommended successor rate, such as use of observation lag or shift, should be left to the issuer to agree on a case-by-case basis.
  • March 2021: The House of Lords debated proposed contract continuity and safe harbour amendments to the UK Financial Services Bill designed to support the introduction of synthetic LIBOR. The ICMA response to UK HMT’s consultation on this topic supported the introduction of these provisions (which would provide that references to panel bank LIBOR in legacy contracts should be read as references to synthetic LIBOR and provide a safe harbour from the risk of litigation). According to the debate, these provisions will not be taken forward in the UK Financial Services Bill, but the UK Government will be considering the issue further and is aware of the need to ensure clarity on this issue emerges quickly.
  • March 2021: The FICC Markets Standards Board (“FMSB”) released a proposed Standard on use of Term SONIA reference rates. The Standard has been developed with the aim of identifying where there may be robust rationales for using Term SONIA for transactions in the loan, bond and derivatives markets and to set out certain expected behaviours of markets participants when using or issuing Term SONIA products in light of the reduced systemic risks associated with using overnight risk free rates. The Sterling Risk-Free Reference Rates Working Group, the FCA and the Bank of England have welcomed the FMSB’s publication.
  • March 2021: The FCA announcement on future cessation and loss of representativeness of the LIBOR benchmarks. Regarding cessation: Publication of all 7 euro LIBOR settings, all 7 Swiss franc LIBOR settings, the Spot Next, 1-week, 2-month and 12-month Japanese yen LIBOR settings, the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings, and the 1-week and 2 month US dollar LIBOR settings will cease immediately after 31 December 2021. Publication of the overnight and 12-month US dollar LIBOR settings will cease immediately after 30 June 2023. Regarding synthetic LIBOR: The FCA will consult on requiring IBA to continue to publish the 1-month, 3-month and 6-month sterling LIBOR settings for a further period on a changed methodology (“synthetic LIBOR”). The FCA will consult on requiring IBA to continue to publish the 1-month, 3-month and 6-month Japanese yen LIBOR settings after end-2021 on a synthetic basis for one additional year. The FCA will continue to consider the case for 1-month, 3-month and 6-month synthetic USD LIBOR after the end of June 2023.
    The FCA announcement also states that: immediately after 31 December 2021, the 1-month, 3-month and 6 month Japanese yen LIBOR settings and the 1-month, 3-month and 6-month sterling LIBOR settings will no longer be representative and representativeness will not be restored, and immediately after 30 June 2023, the 1-month, 3-month and 6-month US dollar LIBOR settings will no longer be representative and representativeness will not be restored.
  • March 2021: IBA Feedback Statement for the consultation on its intention to cease the publication of LIBOR settings: IBA published its feedback statement following its consultation to cease the publication of LIBOR settings. IBA notified the FCA that it intends to cease providing all LIBOR settings for all currencies, subject to any rights of the FCA to compel IBA to continue publication.
  • March 2021: The FCA and Bank of England issued a joint statement confirming the importance of LIBOR transition preparations and urging market participants to continue to take the necessary action to ensure they are ready in advance of LIBOR ceasing. UK regulated firms should expect further engagement from their supervisors at both the Prudential Regulation Authority and the FCA to ensure these timelines are met.
  • March 2021: ISDA issued a statement confirming the fallback ‘spread adjustment’ published by Bloomberg will be fixed as of the date of the announcement for all LIBOR settings. ISDA has also published guidance related to the FCA, IBA and Bank of England announcements.
  • March 2021: The FCA has updated its website, to include a consultation feedback statement and Statement of Policy in relation to Article 23A and a consultation feedback statement and Statement of Policy in relation to Article 23D, subject to the enactment of the Financial Services Bill by Parliament.
  • March 2021: The Sterling Risk-Free Rate Working Group newsletter for February 2021 is available to view here.
  • February 2021: The Sterling Risk-Free Rate Working Group published minutes from its January 2021 meeting.
  • February 2021: The Sterling Risk-Free Rate Working Group updated its priorities and roadmap for transition by end-2021.
  • February 2021: The Investment Association has reached out to issuers on behalf of UK investment managers to encourage issuers to put into effect plans to transition LIBOR-linked instruments as quickly as possible.
  • February 2021: A bond market consultation on the what the successor rate to GBP LIBOR should be for the operation of fallbacks in certain legacy bonds has been published by the Sterling Risk-Free Rate Working Group. Market participants are strongly encouraged to respond to the consultation by the deadline of 16 March 2021.
  • February 2021: The Sterling Risk-Free Rate Working Group newsletter for January 2021 is available to view here.
  • February 2021: The Chair of the Working Group wrote to IBA in September 2020 to request views and better understand IBA’s plans for the sterling LIBOR ICE Swap Rate in the event that sterling LIBOR ceases or becomes unrepresentative. IBA’s response has now been made publicly available.
  • January 2021: Bloomberg has responded to a letter from the Chair of the Working Group, which requested a better understanding of the access of cash market participants to Bloomberg’s published credit adjustment spreads, based on the ISDA historical five year median approach.
  • January 2021: IBA, the current administrator of LIBOR, announced the launch of a series of ICE Term SONIA Reference Rates as a benchmark for use in financial instruments by licensees. The rates are designed to measure expected (i.e. forward-looking) SONIA rates over one-month, three-month, six-month and twelve-month tenor periods and are based on a waterfall methodology using eligible prices and volumes for specified SONIA-linked interest rate derivative products.
  • January 2021: Refinitiv announced the production of its series of Term SONIA Reference Rates from 11 January 2021. The rates are available in one-month, three-month, six-month and twelve-month tenors, following the release of Refinitiv’s “prototype” TSRR in July 2020.
  • January 2021: The Working Group on Sterling Risk-Free Reference Rates (RFRWG) has released a bumper edition of its December newsletter, highlighting progress made over 2020 and key upcoming milestones.
  • January 2021: The RFRWG has updated its top level priorities for 2021, and has released an associated statement.
  • January 2021: The Chair of the RFRWG has written to Bloomberg in order to gain a better understanding of the access that cash market participants, particularly end users, would have to Bloomberg’s published credit adjustment spreads which are based on the ISDA historical five year median approach.
  • January 2021: The RFRWG webpage, which is hosted on the Bank of England’s website, has been restructured to be more user-friendly.

US:

  • April 2021: The ARRC has announced key principles for an ARRC-recommended forward-looking SOFR term rate in order to help guide the ARRC as it considers the conditions it believes are necessary to recommend a SOFR term rate. These principles build on the ARRC’s March 23 update and ongoing ARRC discussions, and will inform the ARRC’s continued consideration of a SOFR-based term rate.
  • April 2021: New York State Governor Andrew Cuomo has signed USD LIBOR legislation into law. Initially presented by the ARRC last year, the new law addresses the issue of legacy contracts that mature after mid-2023 and do not have effective fallbacks. The ARRC have endorsed this decision.
  • March 2021: The ARRC released its newsletter for February/March 2021.
  • March 2021: The ARRC has published a white paper that outlines a model for using SOFR in asset-backed securities (ABS) products. The paper describes how new issuance of ABS products could use 30-day Average SOFR, with a monthly reset, set in advance of the interest accrual period. This methodology uses the actual SOFR rates from the 30-day period before the applicable reset date, which the ARRC determined to be preferable to the alternatives for operational ease. This model for issuing new SOFR-based securitized products was designed and recommended by the ARRC’s Securitization Working Group (SWG).
  • March 2021: The ARRC has welcomed action by the New York State Legislature to reduce risks associated with the transition away from USD LIBOR by passing Senate Bill 297B/Assembly Bill 164B, which will be crucial in minimizing legal uncertainty and adverse economic impacts associated with the transition. The text of the legislation was initially presented by the ARRC last year. The bill’s passage follows confirmation by LIBOR’s regulator and administrator that it would cease publication of representative USD LIBOR for the major LIBOR settings in mid-2023. The legislation will provide legal clarity for contracts without effective fallbacks that are written under New York law and that mature after end of June 2023, and will lessen the burden on New York courts, as legal uncertainty surrounding the transition likely would have prompted disputes.
  • March 2021: The ARRC has stated that it will not be in a position to recommend a forward-looking SOFR term rate by mid-2021, and cannot guarantee that it will be in a position to recommend an administrator that can produce a robust forward-looking term rate by the end of 2021. Accordingly, the ARRC urges market participants not to wait for a forward-looking term rate for new contracts, but to instead be prepared to use the tools available now, such as SOFR averages and index data that can be applied in advance or in arrears, as described in the User's Guide to SOFR. Although submissions received pursuant to Term Rate Request for Proposals (RFP) were received and are being reviewed, the ARRC’s recommendation of an administrator was always contingent upon certain conditions being met — including the development of sufficient liquidity in SOFR derivatives markets, and developing recommendations for an appropriately limited scope of use for the term rate. The ARRC believes that it is not yet in a position to recommend a term rate with confidence based on the current level of liquidity in SOFR derivatives markets. In addition, the ARRC is still evaluating the limited set of cases in which it believes a term rate could be used. The ARRC has established a task force to drive the strategy for its term rate work. This will include work to identify liquidity and other criteria consistent with a recommendation for a limited scope of use, and next steps for the RFP process.
  • March 2021: The ARRC has published a white paper that describes a formula to calculate a fallback from the USD LIBOR ICE Swap Rate to a spread-adjusted SOFR Swap Rate. Contracts that are indirectly linked to USD LIBOR through reference to USD ICE Swap Rates are not covered by existing fallback provisions. The paper is intended to facilitate conversations within industry bodies and between counterparties on incorporating robust fallbacks in both legacy and new contracts referencing the USD LIBOR ICE Swap Rate. The formula presented in the paper was developed by the ARRC’s Market Structure and Paced Transition Working Group and aims to complement a similar approach taken by the Working Group on Sterling Risk-Free Rates in designing a fallback for the British Pound Sterling (GBP) LIBOR ICE Swap Rate.
  • March 2021: The ARRC has released a “Progress Report: The Transition from U.S. Dollar (USD) LIBOR”, outlining key reference rate reform efforts, progress to date, and areas requiring further work. The report provides a comprehensive overview of the LIBOR transition, including a timeline of concrete steps taken in the transition, a table of remaining LIBOR exposures and data on the development of alternative markets. It also provides critical insight into where progress away from USD LIBOR will need to materially accelerate for the market to be adequately prepared.
  • March 2021: The ARRC announced that it has selected Refinitiv to publish its recommended spread adjustments and spread-adjusted rates for cash products, following a request for proposals (RFP) process. Refinitiv will publish ARRC-recommended spread adjustments to SOFR-based rates and spread-adjusted SOFR-based rates for cash products that transition away from U.S. dollar (USD) LIBOR.
  • March 2021: The ARRC confirmed that in its opinion the 5 March 2021 announcements by the IBA and the FCA on future cessation and loss of representativeness of the LIBOR benchmarks constitutes a “Benchmark Transition Event” with respect to all USD LIBOR settings pursuant to the ARRC recommendations regarding more robust fallback language for new issuances or originations of LIBOR floating rate notes, securitizations, syndicated business loans, and bilateral business loans.
  • January 2021: Tom Wipf, Chairman of ARRC, authored a Bloomberg opinion-editorial “Libor’s Endgame in U.S. Requires Urgent Preparation", which explains the significance of late-2020 announcements by regulators and LIBOR’s administrators on the proposed endgame for LIBOR and provides concrete advice to market participants with U.S. dollar LIBOR exposures.
  • January 2021: The ARRC released its newsletter for December 2020 – January 2021.



Contacts:

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

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 and other key materials

Selected speeches

Statements and other publications

UK:
  • November 2020: The latest Working Group on Sterling Risk-Free Reference Rates newsletter for November 2020 is available to view here.
  • November 2020: The FCA has published a Statement setting out its potential approach to the use of proposed new powers under the Financial Services Bill to ensure an orderly wind down of LIBOR. Among other things, the FCA sets out different possible approaches for different LIBOR currencies. The FCA confirm that this statement should not be read as announcing that LIBOR has ceased, or will cease, to be provided permanently or indefinitely or that it is not, or no longer will be, representative.
  • November 2020: The FCA released two corresponding consultations: the first, on designating an unrepresentative benchmark using new powers under proposed Article 23A of the Financial Services Bill, and the second requiring changes to a critical benchmark, including its methodology, using new powers under proposed Article 23D.
  • October 2020: The latest Working Group on Sterling Risk-Free Reference Rates newsletter for October 2020 is available to view here.
  • October 2020: The Working Group on Sterling Risk-Free Reference Rates has published two papers, (i) a summary of the freely available independent RFR calculators on the market and (ii) a summary of the key attributes of Beta versions of Term SONIA Reference Rates (TSRRs) published by independent benchmark administrators. The aim of the papers is to assist market participants and vendors to remain informed and consider whether any amendments may be required to their systems or products if they choose to adopt SONIA compounding methods or transition to TSRRs (where such transition is appropriate, which it isn’t expected to be in the case of the bond markets).
  • September 2020: the FCA has engaged with interest rate swap liquidity providers and interdealer brokers to determine support for a change in the quoting conventions of sterling interest rate swaps in the interdealer market. An FCA survey of liquidity providers identified strong support for a change in the interdealer quoting convention that would see SONIA rather than LIBOR become the default price from 27 October 2020, subject to prevailing market conditions at that time.
  • September 2020: The latest Working Group on Sterling Risk-Free Reference Rates newsletter for September 2020 is available to view here.
  • September 2020: The Working Group on Sterling Risk-Free Reference Rates wrote to ICE Benchmark Administration (IBA) to highlight areas of interest in the derivatives market and request views on the expected status of IBA’s GBP LIBOR ICE Swap Rate in the event that GBP LIBOR ceases or becomes unrepresentative, or of reduced liquidity in GBP LIBOR swaps prior to these events. The letter seeks to better understand IBA’s plans in order for the Working Group to assess the potential impact for legacy non-linear derivatives, and to identify options to promote a smooth and orderly transition in this market.
  • September 2020: The Working Group on Sterling Risk-Free Reference Rates released a recommendation of credit adjustment spread methodology for fallbacks in cash market products referencing LIBOR which identifies the historical five-year median spread adjustment methodology as the preferred methodology for credit adjustment spread calculations across both cessation and pre-cessation triggers for cash products maturing beyond end-2021, and a news release on securing a SONIA-based sterling loan market.
  • September 2020: The Working Group on Sterling Risk-Free Reference Rates released a recommendation paper on the active transition of GBP LIBOR-referencing bonds and a paper on the active transition of GBP LIBOR-referencing loans.
  • September 2020: the Working Group on Sterling Risk-Free Reference Rates released its monthly newsletter for August 2020.
  • September 2020: the Working Group on Sterling Risk-Free Reference Rates released recommendations on standard market conventions for sterling loans (and accompanying releases) based on compounded in arrears SONIA. This includes a recommendation for the use of a ‘Five Banking Days Lookback without Observation Shift’ as the standard approach (aligning with the approach recommended by the ARRC for US dollar loan markets), and a number of other aspects in relation to calculation of interest to support new lending on a SONIA-linked basis.
  • August 2020: In the Bank of England’s August Financial Stability Report, the FPC reiterated that it is essential to end reliance on LIBOR benchmarks before end-2021. Looking ahead, the FCA and PRA expect progress from firms against transition milestones across all key currencies, and expect to scrutinise alternative risk mitigation plans where industry best practice or timelines are not being met. The Report stresses that contractual parties who can transition away from LIBOR should do so on terms that they themselves agree with their counterparties.
  • July 2020: The Working Group on Sterling Risk-Free Reference Rates published its monthly newsletter for July 2020. Recent publications and developments highlighted in the newsletter include the Working Group’s updated and revised 2020-21 priorities and roadmap.
  • July 2020: The Working Group on Sterling Risk-Free Reference Rates issued a statement designed to assist firms in taking action and implementing LIBOR transition plans. The materials include: (i) revised 2020-21 priorities and roadmap, (ii) a Q&A in relation to the RFRWG’s revised end-Q3 milestones for loan markets and (iii) the first in a series of educational videos that provide background on the key elements of LIBOR transition, designed for those less familiar with transition.
  • July 2020: The EU Commission has published its proposal for the BMR review, notably to address the situation of the cessation of a critical benchmark. The press release notably mentions that ‘’The Commission is proposing amendments to the Benchmark Regulation that will empower it to designate a replacement benchmark that covers all references to a widely used reference rate that is phased out, such as LIBOR, when this is necessary to avoid disruption of the financial markets in the EU. (…) For example, the Commission could replace any reference to LIBOR with a reference to a suitable replacement rate. In selecting this replacement rate, the Commission will take into account recommendations made by the relevant industry working groups, such as the US Alternative Reference Rates Committee for the LIBOR or the Working Group on Euro Risk-Free Rates for the EURIBOR. The statutory replacement rate will only be available for financial contracts that reference, for example LIBOR, at the time this benchmark ceases to be published. As the statutory replacement will be a matter of law, contractual conflicts on this issue will be avoided. At the same time, market participants are encouraged to agree on a permanent replacement rate for all new contracts whenever feasible.’’
  • July 2020: Refinitiv has launched a prototype Term SONIA reference rate in one, three and six month tenors.
  • July 2020: The PRA in the UK released a statement outlining PRA views on the implication of LIBOR transition for contracts in scope of the Contractual Recognition of Bail-in and Stay in Resolution parts of the PRA Rulebook. The statement says that “.. firms should consider adding [contractual recognition of bail-in] and [contractual recognition of resolution stay] terms into the documentation for a third-country law governed liability or financial arrangement that is amended for the sole purpose of transitioning away from Libor, as it enhances firm resolvability.”
  • July 2020: ICE Benchmark Administration and FTSE Russell have each progressed to publishing indicative term SONIA reference rates. The rates are currently in indicative form to allow prospective users to evaluate and provide feedback on the approaches and methodology. It will be announced in due course when the term SONIA reference rates are capable of being used in financial instruments.
  • July 2020: The Bank of England announced it will publish the SONIA Compounded Index for the first time on 3 August 2020. This is in response to a discussion paper and associated response from the Bank on the SONIA Compounded Index.
  • July 2020: The Working Group on Sterling Risk-Free Reference Rates released its monthly newsletter for June 2020.
  • June 2020: HM Treasury announced that it intends to bring forward legislation to amend the Benchmarks Regulation (BMR) to give the FCA enhanced powers. These could help manage an orderly wind-down of critical benchmarks such as LIBOR, and, in particular, help deal with the problem identified by the RFR Working Group in its Tough Legacy paper, of ‘tough legacy’ contracts that genuinely have no or inappropriate alternatives and no realistic ability to be renegotiated or amended.
    The legislation would empower the FCA to direct the administrator of LIBOR to change the benchmark methodology, if doing so would protect consumers and market integrity. This is consistent with the recommendations put forward by the Working Group, and would allow the FCA to stabilise certain LIBOR rates during a wind-down period so that limited use in legacy contracts could continue.
    The FCA has also published a supporting statement and Q&As.
    These statements also reiterate the importance of continued focus from market participants on active transition, and state that this remains the only way for parties to have certainty about contractual continuity and control over their contractual terms when LIBOR ceases or is no longer representative. The statements also stress that work to substitute existing LIBOR references, or adopt sufficiently robust fallbacks, including through market standard documents such as the ISDA protocol, should continue.
  • June 2020: The Bank of England published a Discussion Paper in February seeking market feedback on its intentions to publish a SONIA Compounded Index and the usefulness of publishing a set of compounded SONIA “period averages”. The Bank has now published a summary of the feedback received, together with the Bank’s response. Given near universal support from respondents, the Bank has confirmed it will publish a daily SONIA Compounded Index, likely in early August. Respondents’ feedback on the Bank producing a set of “period averages” were mixed, with a lack of consensus on both their usefulness and on the conventions underpinning such rates. As such, the Bank will not be producing them at this time.
  • June 2020: The Working Group on Sterling Risk-Free Reference Rates released its monthly newsletter for May 2020.
  • May 2020: The Working Group on Sterling Risk-Free Reference Rates (RFR WG) has published a paper on tough legacy issues, in line with the RFRWG’s 2020 priority to provide market input on issues around 'tough legacy'. Tough legacy contracts are considered those that do not have robust fallbacks and prove unable to be amended ahead of LIBOR discontinuation. The RFRWG’s Tough Legacy Taskforce has considered tough legacy issues across asset classes in the UK, and has concluded that there is a case for action to address these exposures. The case for action differs by asset class, depending on the contracts involved and the ability to amend the terms. To the extent it is feasible, the Taskforce proposes that the UK Government considers legislation to address ‘tough legacy’ exposures. However, the Taskforce recognises that there is no guarantee that such a solution will materialise, that it will materialise across all relevant legal jurisdictions, or that it would be available for all products and circumstances. The Taskforce also recognises that any potential solution may not be economically neutral or suitable for particular contracts.
  • May 2020: The Bank of England released a market notice on its risk management approach to LIBOR Linked Collateral (as defined in the notice). Pursuant to the notice, a haircut add-on will be applied to all LIBOR Linked Collateral: 10 percentage points from 1 April 2021, 40 percentage points from 1 September 2021 and 100 percentage points from 31 December 2021. For the avoidance of doubt, haircuts will be capped at 100 per cent.
  • May 2020: In a series of measures announced on 7 May by the Bank of England, the FCA and the PRA, the May 2020 Interim Financial Stability Report reflects on LIBOR rates in light of recent market volatility, and the long-standing weaknesses of LIBOR benchmarks (pages 13-15). While there may be a need for short-term reprioritisation due to Covid-19, there remain a number of areas where preparations for transition have been able to continue despite market disruption. It remains the central assumption that firms cannot rely on LIBOR being published after the end of 2021. In addition, a Regulatory Initiatives Forum published a Regulatory Initiatives Grid, which re-affirms that the end-2021 deadline has not been delayed. Finally, the PRA issued a statement detailing the reprioritisation of its work due to the impact of COVID-19, and will resume full supervisory engagement on LIBOR from 1 June 2020.
  • May 2020: The Working Group on Sterling Risk-Free Reference Rates published its monthly newsletter for April 2020.
  • April 2020: The Working Group on Sterling Risk-Free Reference Rates (RFRWG) released a further statement on the impact of Coronavirus on the timeline for firms’ LIBOR transition plans, in which it recognises that it will not be feasible to complete transition away from LIBOR across all new sterling LIBOR linked loans by the original end-Q3 2020 target, and makes associated recommendations. The statement also says that the FCA, the Bank of England and the Chair of the RFRWG will support the delivery of the RFRWG workplan in key areas that will continue the momentum on LIBOR transition.
  • April 2020: The Working Group on Sterling Risk-Free Reference Rates published its monthly newsletter for March 2020.
  • March 2020: UK HMRC has published a draft guidance paper explaining its view on the tax implications of changes to financial instruments driven by benchmark reform. Among other things, there is a statement that “Where the parties agree to change the terms of the instrument for the purposes of responding to the withdrawal of LIBOR, HMRC would normally view this as a variation of the existing instrument. The amended contract should be regarded as the same contract and entered into at the same time as the original one. This would apply, for example, where the parties agree to replace LIBOR for one of the new reference rates or with a fixed interest rate. It does not matter if the spread on the instrument needs to be amended slightly, or if additional payments are made between the parties, provided the economics of the transaction remain mostly the same. Comments on the draft guidance are requested by 28 May 2020.
  • March 2020: The FCA, Bank of England and Working Group on Sterling Risk-Free Reference Rates issued a statement on the impact of COVID-19 on firm’s LIBOR transition plans. The central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed and end-2021 should remain the target date for all firms to meet. The full statement is available on the Working Group on Sterling Risk-Free Reference Rates' website and the FCA website.
  • March 2020: The Working Group on Sterling Risk-Free Reference Rates published a summary of responses to its consultation on credit adjustment spread methodologies for fallbacks in cash products referencing GBP LIBOR. The consultation identified a strong consensus in favour of the historical 5 year median approach, in line with the approach adopted by ISDA, as the preferred methodology for credit adjustment spreads across both cessation and pre-cessation fallbacks for cash products maturing beyond end-2021.
  • March 2020: The FCA released a statement on how it would announce LIBOR contractual triggers.
  • March 2020: The UK Budget 2020 included a statement that the UK government will consult to ensure that where tax legislation makes reference to LIBOR it continues to operate effectively. The consultation will also enable the government to ensure it is aware of all of the significant tax issues that arise from the reform of LIBOR and other benchmark rates.
  • March 2020: The Working Group on Sterling Risk-Free Reference Rates issued a statement welcoming the Bank of England’s discussion paper on the publication of a SONIA compounded index to further support the widespread use of SONIA compounded in arrears. The statement outlines how bond markets can use the proposed SONIA index and its relevance for issuers’ choice of conventions.
  • March 2020: The Working Group on Sterling Risk Free Reference Rates published its monthly newsletter for February 2020.
  • February 2020: The FCA sent a “Dear CEO” letter to all UK regulated asset management firms setting out their expectations for firms as they prepare for the end of LIBOR.
  • February 2020: The Bank of England announced that it intends to publish a daily SONIA Compounded Index, which is a number representing the returns from a rolling investment earning interest each day at the SONIA rate. The change in this index between any two dates could be used to calculate the interest rate payable on a SONIA product over that period. This is consistent with the approach taken by the Federal Reserve Bank of New York and the publication of its SOFR Index. Publication of the SONIA Compounded Index is anticipated to commence by end July 2020. In addition to the SONIA Compounded Index, the Bank of England is considering whether – and, if so, how – to publish daily a simple set of SONIA Period Averages. These could directly provide the interest rate payable over specific periods of time (i.e. the compounded rate over the last X days or months). The Bank invited comments on the options presented in the discussion paper by 9 April 2020, after which it will decide whether it would be helpful to publish such averages.
  • February 2020: The Bank of England announced that from October 2020 it will begin increasing haircuts on LIBOR-linked collateral it lends against.  From 2020 Q3, the Bank will make newly-issued LIBOR collateral ineligible and progressively increase the haircuts on existing LIBOR-linked collateral over time. Haircuts are scheduled to reach 100% (i.e. implying effective ineligibility) at the end of 2021.
  • 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.
  • January 2020: The Working Group on Sterling Risk Free Reference Rates published its monthly newsletter for January 2020.

EU and euro area:

  • November 2020: The working group on euro risk-free rates released a special edition Newsletter highlighting the two recent consultations on Euribor fallback trigger events and Euribor fallback rates.
  • November 2020: The working group on euro risk-free rates published two consultations on (i) EURIBOR fallback trigger events, and (ii) €STR-based EURIBOR fallback rates, together a dedicated press release. Replies to these CPs are welcome until 15 January 2021, 17:00 CET. In addition, a virtual roundtable event, including Q&A sessions dedicated to the two public consultations, will take place on 14 December 2020, 14:30 – 18:00. The registration link will be published on the ECB’s website soon.
  • November 2020: A Statement welcoming the launch by ISDA of its 2020 IBOR Fallbacks Protocol and IBOR Fallbacks Supplement on behalf of the EUR RFR WG, the ECB, the European Commission, ESMA and the FSMA was published.
  • October 2020: The working group on euro risk-free rates released its October 2020 newsletter.
  • October 2020: The ECB released a summary of responses to the ECB consultation on the publication of compounded term rates using €STR.
  • October 2020: ESMA released a public statement on the impact of Brexit on the Benchmarks Regulation setting out the position of third country administrators, and use of their benchmarks, during and after the Brexit transition period.
  • September 2020: Stephen Maijoor (ESMA Chair) delivered a speech outlining the diverging paths for LIBOR and EURIBOR, and confirming that there are currently no plans to discontinue EURIBOR, but that it is a regulatory requirement for EU supervised entities to incorporate fallback provisions in their EURIBOR contracts.
  • July 2020: The EU Commission has published its proposal for the BMR review, notably to address the situation of the cessation of a critical benchmark. The press release notably mentions that ‘’The Commission is proposing amendments to the Benchmark Regulation that will empower it to designate a replacement benchmark that covers all references to a widely used reference rate that is phased out, such as LIBOR, when this is necessary to avoid disruption of the financial markets in the EU. (…) For example, the Commission could replace any reference to LIBOR with a reference to a suitable replacement rate. In selecting this replacement rate, the Commission will take into account recommendations made by the relevant industry working groups, such as the US Alternative Reference Rates Committee for the LIBOR or the Working Group on Euro Risk-Free Rates for the EURIBOR. The statutory replacement rate will only be available for financial contracts that reference, for example LIBOR, at the time this benchmark ceases to be published. As the statutory replacement will be a matter of law, contractual conflicts on this issue will be avoided. At the same time, market participants are encouraged to agree on a permanent replacement rate for all new contracts whenever feasible.’’
  • July 2020: The EBC has announced that it is considering the publication of compounded term rates based on the €STR. In this context, the ECB has launched a public consultation on the publication of compounded €STR rates which seeks views on specific characteristics of compounded term rates based on €STR. The deadline for responses is 11 September.
  • July 2020: Two further ECB publications have been released: (i) Horizontal assessment of SSM banks’ preparedness for benchmark rate reforms and (ii) Report on preparations for benchmark rate reforms. These two documents are a follow-up to the ‘’dear CEOs’’ letter sent last summer to the banks under supervision of the ECB/SSM. One of the key findings of the Assessment is that: ‘’While banks are aware of the potential risks entailed by the BMR reform, their action plans and, more concretely, the development and implementation of mitigation actions, are generally behind schedule.’’. The Report details some EONIA and Euribor exposures of the European banks, the risks and challenges put forward by the supervised banks, and also lists some examples of best practices observed in terms of governance and implementation.
  • July 2020: The Euro RFRWG has published its July 2020 newsletter, which provides an update of the work of the Euro RFRWG and refers to developments in international markets.
  • July 2020: A letter was sent by the Chair of the Euro RFRWG to the Chair of the International Accounting Standard Board (IASB) relating to concerns in relation to potential accounting issues that could be considered as a direct consequence of the IBOR reform; specifically, IFRS9/IAS39 hedge accounting and IFRS9 solely payment of principal and interest (SPPI). In the letter the Euro RFRWG asked the IASB for (i) relief on the use of basis swaps in hedge accounting, and (ii) guidance on the use and form of regulated rates in the context of SPPI testing.
  • June 2020: the working group on euro risk-free rates published its recommendation on swaptions affected by the CCPs discounting transition to €STR.
  • May 2020: the working group on euro risk-free rates released a summary of responses to the public consultation on swaptions impacted by the CCP discounting transition from EONIA to €STR.
  • April 2020: The working group on euro risk-free rates released its April 2020 newsletter.
  • April 2020: The European Association of CCP Clearing Houses (EACH) has released a statement that it has agreed to suggest that the €STR discounting regime switch date be postponed to Monday 27 July 2020, subject to the successful conclusion of relevant internal agreements on the part of interested members of EACH.
  • April 2020: ESMA and the Monetary Authority of Singapore signed an MoU which will allow the use of Singapore’s financial benchmarks in the EU (SIBOR and Singapore Dollar Swap Offer Rate (SOR)).
  • April 2020: ESMA issued a Public Statement regarding the timeliness of fulfilling external audit requirements for interest rate benchmark administrators and contributors to interest rate benchmarks. Due to the difficulties arising from the COVID-19 pandemic, ESMA expects NCAs not to prioritise supervisory actions against administrators and supervised contributors relating to the timeliness of fulfilling audit requirements where the audits are carried out by 30 September 2020.
  • March 2020: The European Commission published a roadmap of the BMR review.
  • March 2020: The working group on euro risk-free rates published its March 2020 newsletter.
  • March 2020: The working group on euro risk-free rates updated its communications toolkit, including the slides on EURIBOR fallbacks.
  • March 2020: The working group on euro risk-free rates published a consultation giving interested parties the opportunity to provide feedback as to whether the working group should issue recommendations regarding the voluntary exchange (or lack thereof) of cash compensation between bilateral counterparties to swaption contracts impacted by the CCP discounting switch from EONIA to the €STR. The working group expects that the feedback on this consultation document will provide valuable input in order to evaluate whether recommendations from the working group would be of assistance to the market and, if so, what the recommended approach should be. The deadline for responses is 3 April 2020. The European Commission and the European Central Bank will evaluate all responses and prepare an anonymised summary of their feedback. This summary will be published on the ECB’s website and considered by the working group at its meeting on 21 April 2020.
  • March 2020: ESMA launched a consultation on draft RTS under the EU Benchmarks Regulation covering various aspects relevant to benchmark administrators (e.g. governance, benchmark methodology, systems and controls). There is also a section on mandatory administration of a critical benchmark, which proposes the minimum criteria that NCAs should take into account when assessing the cessation of a critical benchmark or the transition of a critical benchmark to a new administrator pursuant to Article 21(1)(b) of the BMR. The deadline for responses is 9 May 2020.
  • February 2020: The working group on euro risk-free reference rates published a report on the transfer of EONIA’s cash and derivatives markets liquidity to the €STR on the working group main website and on the key milestones webpage, together with a press release.
  • February 2020: ESMA announced that it responded to the European Commission consultation on the EU Benchmarks Regulation review. On critical benchmarks, ESMA proposes that: (i) competent authorities are able to request an administrator to change its methodology; (ii) the process of suspension or withdrawal of authorisation or registration of an administrator is clarified; and (iii) the assessment by competent authorities of the cessation procedures of the administrator is clarified. In relation to third country benchmarks, ESMA proposes to take into account different alternative approaches when defining the scope of the BMR; and, to increase transparency to the benefit of benchmark users, ESMA proposes to include the list of both EU and third-country benchmarks in its register together with an appropriate identification of benchmarks.

US:

  • December 2020: The ARRC posted an updated version of the proposal for New York State legislation, originally released on 6 March 2020. The proposal is intended to minimize legal uncertainty and adverse economic impacts associated with the LIBOR transition. On 16 December 2020, a letter signed by several ARRC members and other firms and associations was posted to the SIFMA website, expressing support for the ARRC's draft legislative approach.
  • December 2020: The ARRC released a guide about recent announcements made by U.S. and UK regulators and LIBOR’s administrator for the proposed endgame for USD LIBOR. ARRC Chair Tom Wipf also participated in a webinar (recording and transcript) about those developments.
  • December 2020: The ARRC released its latest newsletter for October-November 2020.
  • November 2020: Following the announcement that ICE Benchmark Administration (IBA) is to consult on its intention to cease the publication of GBP, EUR, CHF and JPY LIBOR after 31 December 2021, IBA has further announced that it will consult on its intention to cease publication of the one-week and two-month US dollar LIBOR settings immediately following the LIBOR publication on 31 December 2021, and the remaining US dollar LIBOR settings immediately following the LIBOR publication on 30 June 2023. This announcement was followed by a statement from the FCA, the Board of Governors of the Federal Reserve Board, the Board of Governors of the Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, and ISDA. The FCA statement clarified that “This statement should not be read as announcing that the LIBOR benchmark has ceased, or will cease, to be provided permanently or indefinitely or that it is not, or no longer will be, representative for the purposes of language adopted by ISDA”. The ISDA statement clarified that “None of these [foregoing] statements constitute an index cessation event under the IBOR Fallbacks Supplement or the ISDA 2020 IBOR Fallbacks Protocol. Therefore, these statements will not trigger the fallbacks under the supplement or protocol (ie, to the adjusted risk-free rate plus spread) or have any effect on the calculation of the spread. These statements will also not trigger fallbacks under the 2018 ISDA Benchmarks Supplement or its protocol”.
  • October 2020: the ARRC released FAQs to its Request for Proposals (RFP) for spreads (which are designed for use in legacy contracts with the ARRC's recommended hardwired fallback language, and other instances where spread-adjusted replacement rates are needed).
  • September 2020: The latest ARRC newsletter for August-September is available to view here.
  • September 2020: The ARRC released an RFP for a potential administrator to publish forward-looking SOFR term rates in 1-month and 3-month tenors; 6-month or 1-year tenors may also be produced if considered feasible.
  • September 2020: The ARRC released a request for proposals for the administration of recommended spread adjustments and spread-adjusted SOFR rates, which are designed for use in legacy contracts with the ARRC’s recommended hardwired fallback language, and other instances where spread-adjusted replacement rates are needed.
  • August 2020: The ARRC updated its recommended Best Practices to encourage adherence to the forthcoming ISDA IBOR Fallback Protocol during the escrow period.”
  • August 2020: The ARRC Chair Tom Wipf sent a letter to ARRC Members urging them to be prepared to sign onto the ISDA IBOR Fallback Protocol, consistent with the ARRC's recommended Best Practices.
  • August 2020: The ARRC released the SOFR Starter Kit, a set of factsheets to inform the public about the transition away from USD LIBOR to SOFR. The SOFR Starter Kit includes three factsheets on (1) the background on the impetus for the transition away from LIBOR and the history of the ARRC and its work to select a preferred alternative rate, (2) key facts and figures about SOFR and (3) next steps covering SOFR best practices, the ARRC’s user’s guide to SOFR, fallback language and helpful tools from the ARRC.
  • August 2020: FINRA issued Regulatory Notice 20-26. FINRA reminds firms to evaluate their exposure to LIBOR and review their preparedness to manage LIBOR’s phase-out. To understand how firms are preparing for that phase-out, FINRA surveyed a representative cross-section of member firms, including some firms with significant trading volume or positions in LIBOR-linked securities. Notice 20-26 provides a summary of the results of the survey.
  • July 2020: The ARRC published its June - July 2020 newsletter, which summarises the most recent ARRC, US official sector, market and international developments and SOFR market liquidity.
  • July 2020: The ARRC has released a guide to Internal Systems and Processes: Transition Aid for SOFR Adoption to support market participants transitioning to SOFR. This document builds on previous ARRC publications, including the User’s Guide to SOFR, the Practical Implementation Checklist, and the Buy-Side Checklist, to identify the processes and systems that may need to be updated for a successful transition to SOFR.
  • July 2020: The ARRC announced the SOFR Summer Series, a series of webinars taking place in July and August designed to educate the public on the history of LIBOR; the development and strengths of SOFR; progress made in the transition away from LIBOR to date; and how to ensure organizations are ready for the end of LIBOR. The schedule and registration is available here.
  • June 2020: The ARRC has released responses to its supplemental consultation on spread adjustments. As a result of the feedback, the ARRC will implement its spread methodology recommendations as follows: for cash products other than consumer products, the ARRC’s recommended spread adjustment will match the value of ISDA’s spread adjustments to U.S. dollar LIBOR and for all cash products, in the event that a pre-cessation event is operative, the ARRC’s recommended 5-year historical median spread adjustments will be determined at the same time as the ISDA’s spread adjustments, which will be at the time of any announcement that LIBOR will or has ceased or will or has become no longer representative.
  • May 2020: The ARRC has published its April – May newsletter, which summarises the most recent ARRC, US official sector, market and international developments and SOFR market liquidity, and includes a section on COVID-19.
  • May 2020: The ARRC welcomed news from the Federal Housing Financing Agency (FHFA) of a LIBOR Transition Playbook, published jointly today by Fannie Mae and Freddie Mac. The Playbook addresses (among other things) Fannie Mae Multifamily (MF) ARMs and mortgage-backed securities, Floating Rate loans and securities. It, together with joint FAQs and other resources, are available on the LIBOR websites for Fannie Mae and Freddie Mac.
  • May 2020: The ARRC released recommended best practices for technology and operations vendors relevant to the transition from USD LIBOR to SOFR. The ARRC also released results from its recent vendor readiness survey on the status of work underway to facilitate the transition. For FRNs, the ARRC recommends a vendor readiness dates of no later than 30 June 2020 and for securitisations, no later than 31 December 2020.
  • May 2020: The ARRC has issued a supplemental consultation seeking further views on technical issues related to spread adjustment methodologies for cash products referencing USD LIBOR, which builds on the feedback received on its original consultation. The spread adjustments are intended for use in USD LIBOR contracts that have incorporated the ARRC’s recommended fallback language or for legacy USD LIBOR contracts where a spread-adjusted SOFR can be selected as a fallback. The ARRC announced that its recommended spread adjustment methodology would be based on a historical median over a five-year lookback period; this aligns with the ISDA recommended methodology for derivatives and would make the ARRC’s recommended spread-adjusted version of SOFR comparable to USD LIBOR. The ARRC is consulting on the option to use the same spread adjustment values that will be used by ISDA across all of the different fallback rates, rather than using the same adjustment methodology to calculate a different spread adjustment for each potential fallback rate. Recognizing that ISDA will now include a pre-cessation trigger, the supplemental consultation also seeks views on whether the timing of the calculation of the ARRC’s spread adjustment should match ISDA’s timing if a pre-cessation event is operative.
  • May 2020: The ARRC’s Floating Rate Notes Working Group released a statement to provide market participants with information about how the New York Fed’s published SOFR Index may be referenced in floating rate notes. The statement includes structuring considerations as well as a sample term sheet for floating rate notes referencing the SOFR Index.
  • April 2020: The ARRC has unveiled a set of key objectives for 2020, which aim to advance the ARRC’s work and mission. They build on the ARRC’s existing work and underscore the important progress that the ARRC has made in the past year toward achieving market readiness and supporting the voluntary adoption of SOFR. They have been developed with the potential impacts of COVID-19 in mind.  
  • April 2020: The ARRC released a webinar today which provides an in-depth overview of the ARRC’s proposal for New York State legislation, which was released on 6 March 2020. As discussed in greater detail on the webinar, the proposal is intended to minimize legal uncertainty and adverse economic impacts associated with the LIBOR transition.
  • April 2020: The ARRC welcomed Fannie Mae and Freddie Mac’s announcements that provided additional details about their SOFR-linked adjustable-rate mortgage (ARM) products.
  • April 2020: The ARRC announced a recommendation of a spread adjustment methodology for cash products based on a historical median over a five-year lookback period calculating the difference between USD LIBOR and SOFR. This matches the methodology recommended by ISDA for derivatives and would make the ARRC’s recommended spread-adjusted version of SOFR comparable to USD LIBOR and consistent with ISDA’s fallbacks for derivatives markets.
  • March 2020: The ARRC released its February-March 2020 newsletter. This newsletter summarises the most recent ARRC, US official sector, market and international developments and SOFR market liquidity.
  • March 2020: The ARRC released a proposal for New York State legislation. The legislation is intended to minimize legal uncertainty and adverse economic impacts associated with LIBOR transition. The ARRC will hold a webinar on the legislative proposal in the coming weeks.
  • March 2020: The ARRC announced that it is extending the comment period for public feedback on its consultation about spread adjustment methodologies for cash products referencing USD LIBOR. The consultation was initially released on 21 January 2020 and the comment period is being extended until 25 March 2020 to provide sufficient time to allow for thorough feedback. The consultation proposes a static spread adjustment that would be implemented at a specific time on or before USD LIBOR’s cessation and would make the spread-adjusted version of the SOFR comparable to USD LIBOR.
  • March 2020: The Federal Reserve Bank of New York began publishing 30-, 90-, and 180-day SOFR Averages as well as a SOFR Index, in order to support a successful transition away from USD LIBOR. The Chair of the ARRC welcomed this.
  • February 2020: The ARRC has welcomed the US Federal Housing Finance Agency’s announcement that Fannie Mae and Freddie Mac will stop accepting adjustable-rate mortgages based on LIBOR by the end of 2020; and plan to begin accepting ARMs based on SOFR later in 2020. Both Fannie Mae and Freddie Mac also announced they would adopt the ARRC’s recommended fallback language.
  • January 2020: The ARRC released its December 2019 - January 2020 newsletter. This newsletter summarises the most recent ARRC, US official sector, market and international developments and SOFR market liquidity.
  • January 2020: The ARRC released two items developed by its Operations/Infrastructure Working Group: a vendor survey and a buy-side checklist. Both documents are intended to support market participants’ work to address operational challenges in the transition from USD LIBOR to SOFR. As noted in the accompanying letter, the survey serves as a self-assessment tool for software and technology vendors to assess their own readiness, while also serving as a platform to raise operational issues to the ARRC. The checklist provides steps that buy-side firms can consider when transitioning from LIBOR.
  • 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.

Switzerland:
  • February 2020: SIX has obtained endorsement by the Swedish Financial Supervisory Authority under the EU BMR in respect of its major Swiss indices, including SARON. These indices are now listed in the ESMA register.

Global:
  • December 2020: Following the announcement by ICE Benchmark Administration (IBA) of its intention to consult on the cessation of the publication of some LIBOR settings, the relevant consultation has now been published with a deadline for responses of 5pm London time on Monday 25 January 2021. The consultation is not, and must not be taken to be, an announcement that IBA will cease or continue the provision of any LIBOR settings after 31 December 2021 or 30 June 2023.
  • November 2020: The Financial Stability Board released a Progress Report, Reforming Major Interest Rate Benchmarks - “The year of transition away from LIBOR” which gives an overview of progress on transition to risk-free rates across a range of currencies, accounting, tax and regulatory issues and a global transition roadmap for LIBOR.
  • November 2020: IBA has announced that it will consult on its intention that the GBP, EUR, CHF and JPY LIBOR panels would, subject to confirmation following IBA’s consultation, cease at end-2021. The IBA confirm that this statement should not be read as announcing that LIBOR has ceased, or will cease, to be provided permanently or indefinitely or that it is not, or no longer will be, representative.
  • October 2020: ISDA has launched its IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol. The Fallbacks Supplement will amend ISDA’s standard definitions for interest rate derivatives to incorporate robust fallbacks for derivatives linked to certain IBORs. The Fallbacks Protocol will enable market participants to incorporate the revisions into their legacy non-cleared derivatives trades with other counterparties that choose to adhere to the protocol. Both will become effective on 25 January 2021.
  • October 2020: The FSB has published a global transition roadmap for LIBOR, which sets out key steps to remove remaining dependencies on LIBOR by the end of 2021.
  • October 2020: ISDA published a statement from its Board of Directors on the forthcoming launch of the IBOR Fallbacks Supplement and IBOR Fallbacks Protocol, which it hopes will launch on 23 October 2020 and will be effective from 25 January 2021. This was subsequently welcomed by the Sterling Risk-Free Rate Working Group, the ARRC and the FSB, which strongly encourages widespread and early adherence to the Protocol as it will be a major driver of transition for derivatives in all LIBOR currencies and a critical step in benchmark transition ahead of end-2021.
  • October 2020: The US Department of Justice has written to ISDA concluding that the ISDA's Protocol is unlikely to produce anticompetitive effects, and has the potential to offer substantial benefits to the financial services industry. Accordingly, the DoJ has no present intention to challenge ISDA's proposal to amend its standardized documentation.
  • August 2020: The International Accounting Standards Board (IASB) has finalised its response to IBOR reforms and other interest rate benchmarks by releasing a package of Phase 2 amendments to IFRS Standards, which amends requirements in IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases relating to: changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities; hedge accounting; and disclosures. A project summary has also been published.
  • July 2020: ISDA published a statement from its Board of Directors on adherence to the forthcoming IBOR Fallback Protocol stating, among other things, that members of the ISDA Board of Directors strongly support broad adherence to the IBOR Fallback Protocol among all market participants globally that have non-cleared derivatives exposure to LIBOR and other IBORs.
  • July 2020: ISDA launched a new indicator to monitor the adoption of alternative RFRs in derivatives trading. The ISDA-Clarus RFR Adoption Indicator will be available each month on ISDA’s website. A whitepaper on the methodology is available.
  • July 2020: ISDA published a letter to the Chairs of several official RFR Working Groups regarding the launch of its IBOR Fallback Protocol and the IBOR Fallback Supplement outlining the next steps and seeking support for a successful launch.
  • July 2020: Bloomberg has begun publishing calculations related to IBOR fallbacks, including the adjusted RFR (compounded in arrears), the spread adjustment and the ‘all in’ IBOR fallback rates for a variety of IBORs across various tenors, all of which will be made broadly available to industry participants through various distribution channels, including the Bloomberg Terminal®, the desktop API and Bloomberg Data License. The real time data will also become available through authorized redistributors, and is publicly available on the Bloomberg website on a delayed basis.
  • July 2020: FSB and Basel Committee set out supervisory recommendations for benchmark transition. This report recommends actions to facilitate financial and non-financial firms’ transition from LIBOR by end-2021 and presents to the G20 the findings from a questionnaire on supervisory issues related to LIBOR transition.
  • June 2020: The FMSB published a Spotlight Review on LIBOR transition: Case studies for navigating conduct risk. This Spotlight Review includes practice observations and practical case studies to support firms when considering the risks to fairness and effectiveness as the market moves to risk-free rates as more sustainable and representative benchmarks.
  • June 2020: ISDA has published a factsheet, Understanding IBOR Benchmark Fallbacks, together with a video interview, explaining why changes to fallbacks are necessary.
  • May 2020: ISDA published a report summarising the final responses to its consultation on the implementation of pre-cessation fallbacks for derivatives referencing LIBOR. The report confirmed ISDA’s preliminary findings, which is that a significant majority of respondents support including pre-cessation and permanent cessation fallbacks without optionality or flexibility in the amended 2006 ISDA Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades. ISDA expects to publish amendments to the 2006 ISDA Definitions to incorporate the fallbacks for new trades in July. A protocol will simultaneously be launched to allow participants to incorporate the revisions into legacy trades if they choose to. Both will come into effect before the end of the year.
  • April 2020: Bloomberg published a rulebook setting out the final methodologies for the IBOR fallbacks that ISDA expects to implement for certain key IBORs via a Supplement to the 2006 ISDA Definitions and related Protocol. The rulebook is available on the Bloomberg Terminal ({ISDA <Go>}), the Bloomberg website (linked to Bloomberg.com/LIBOR) and on the ISDA website. The final methodology is based on the results of the four market-wide consultations that ISDA conducted between 2018 and 2020.
    Bloomberg expects to publish indicative data on a currency-by-currency basis in the coming weeks. Bloomberg and ISDA will also publish additional educational materials to help market participants understand the IBOR fallback methodologies and how they will be implemented in ISDA documentation, and expect to host a webinar on these issues. The rulebook does not yet include pre-cessation fallbacks for LIBOR. It will be updated to cover this concept as work on how to implement pre-cessation fallbacks for LIBOR evolves.
  • April 2020: ISDA published its bilateral template agreement (available as a free download here) that can be used to: embed robust fallbacks into EONIA referencing transactions or collateral agreements, and/or switch references to EONIA to references to €STR or €STR+8.5bps in transactions, and/or switch references to EONIA to references to €STR in collateral agreements. The template allows the above options to be mixed. It does not stipulate whether any compensation is due in relation to such amendments but provides a blank clause which parties can use to specify compensation they may agree bilaterally. The template may also be used for non-ISDA documentation specified by the parties but ISDA has not conducted any due diligence on whether the agreement would be effective in relation to any non-ISDA documentation as drafted and so parties need to make their own determinations.
  • April 2020: ISDA has announced preliminary results of its consultation on the implementation of pre-cessation fallbacks for derivatives referenced to LIBOR. The initial results indicate a significant majority of respondents are in favour of including both pre-cessation and permanent cessation fallbacks as standard language in the amended 2006 ISDA Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades. While the results are subject to further analysis, ISDA currently expects to move forward on the basis that pre-cessation fallbacks based on a ‘non-representativeness’ determination and permanent cessation fallbacks would apply to all new and legacy derivatives referencing LIBOR that incorporate the amended 2006 ISDA Definitions. The updated definitions for other covered interbank offered rates (IBORs) will continue to include permanent cessation fallbacks only.
  • April 2020: The IASB proposed amendments to IFRS Standards to assist companies in providing useful information to investors about the effects of interest rate benchmark reform on financial statements. The IASB has been considering the effects of interest rate benchmark reform on financial reporting since 2018, splitting its work into two phases. The first phase culminated in amendments to some IFRS Standards in September 2019, providing temporary exceptions to specific hedge accounting requirements and requiring related disclosures in the period during which there is uncertainty about contractual cash flows arising from interest rate benchmark reform. The IASB has now published further proposed amendments as part of the second phase of its project. These proposed amendments aim to address issues affecting financial statements when changes are made to contractual cash flows and hedging relationships as a result of the reform.
  • March 2020: ISDA announced that it would re-consult following (i) the release of new information by the FCA and the IBA on the length of time LIBOR may be published following a regulatory statement that the benchmark is no longer representative of the underlying market; and (ii) the launch of a consultation by LCH on proposed rule book changes to implement pre-cessation fallbacks. The statements and this new consultation follow a 2019 ISDA consultation that was unable to find market consensus on how to implement pre-cessation fallbacks in derivatives contracts. The new consultation asks whether the 2006 ISDA Definitions should be amended to include fallbacks that would apply to all covered derivatives following the permanent cessation of an IBOR or a ‘non-representative’ pre-cessation event, whichever occurs first. Under this scenario, a single protocol would also be launched to allow participants to include both pre-cessation and permanent cessation fallbacks within their legacy derivatives trades.
  • March 2020: ISDA published a report summarising the final results of its supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing euro LIBOR and EURIBOR. The report confirms the findings published by ISDA at the end of February 2020 that the overwhelming majority of respondents agreed with an implementation based on the ‘compounded setting in arrears rate approach with a backward-shift adjustment’ and a spread adjustment based on a ‘historical median over a five-year lookback period’ for fallbacks in derivatives referencing EUR LIBOR and EURIBOR and other less widely used IBORs, consistent with the preferred approach for other IBOR fallbacks.
  • February 2020: The Basel Committee on Banking Supervision (BCBS) published a newsletter on benchmark rate reforms. Among other things, it confirms that, under the Basel Framework, amendments to capital instruments pursued solely for the purpose of implementing benchmark rate reforms will not result in them being treated as new instruments for the purpose of assessing the minimum maturity and call date requirements or affect their eligibility for transitional arrangements of Basel III.
  • February 2020: ISDA has published a table identifying its key workstreams relating to IBOR reform and the development of RFRs.
  • 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: Developments in relation to pre-cessation triggers for derivatives: The FCA responded to ISDA following ISDA’s letter of December 2019 which, in turn, was a response to a letter from the Co-Chairs of the FSB’s Official Sector Steering Group regarding pre-cessation triggers in derivative contracts referencing key IBORs. The FCA letter sets out the reasons why “market participants should not assume that any period of non-representative LIBOR based on reduced panel bank submissions would last for more than a short period (i.e., a period of months, not years).” ISDA has also received a response to its letter from ICE Benchmark Administration. In addition, London Clearing House announced on 27 January that it is commencing a rulebook consultation process regarding the inclusion of an automatic trigger into fallback arrangements where a relevant regulatory authority determines an existing benchmark to be non-representative (i.e. a “pre-cessation trigger”). The draft rulebook change proposes the same approach that is planned to be used in respect of permanent cessation triggers. That is, to use the adjusted RFR as formulated in the relevant ISDA supplemented IBOR definition together with a credit spread adjustment. The consultation period ends on 23 March 2020.
  • 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.



Contacts:

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

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 and other key 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.
  • UK, 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 Recording of discussion on LIBOR transition in the UK between BoE, FCA and Working Group, Last orders: Calling time on LIBOR - speech by Dave Ramsden, Speech by Tushar Morzaria, Chair, Working Group on Sterling Risk-Free Reference Rates and Barclays Group CFO. Please also see “Recent statements and other publications” below for additional materials.
  • US, June 2019: The next stage in the LIBOR transition: Remarks by Randal K. Quarles, Vice Chair for Supervision, Board of Governors of the Federal Reserve Systems and Chair Financial Stability Board at ARRC Roundtable, on 3 June 2019.
  • Euro area, May 2019: Tilman Lueder, Head of Securities Markets at the European Commission, gave an update on the state of play for the European Benchmark Regulation on 21 May, noting in particular that EONIA and EURIBOR are due to be authorised under the European Benchmark Regulation and that the 2 year extension of the transition period under the Benchmark Regulation will be used to focus on work on third country benchmarks and the recognition, endorsement and equivalence regimes.
  • Remarks by Randal K. Quarles, Vice Chair for Supervision, Board of Governors of the Federal Reserve Systems and Chair Financial Stability Board at The Financial Stability Board Roundtable on Reforming Major Interest Rate Benchmarks, Washington, D.C. on 10 April 2019: Progress on the Transition to Risk-Free Rates
  • Speech given by Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists, of the FCA at the Investment Association, London on 21 February 2019: Ending reliance on LIBOR: Overview of progress made on transition to overnight risk-free rates and what remains to be done
  • Speech given by Edwin Schooling Latter, Director of Markets and Wholesale Policy of the FCA at the International Swaps and Derivatives Association (ISDA) Annual Legal Forum on 28 January 2019: LIBOR transition and contractual fallbacks

Statements and other publications

UK:
  • 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.
  • November 2019: The FCA has answered key questions on conduct risk arising from LIBOR transition, outlining their expectation that: firms have a strategy in place and take necessary action during LIBOR transition, and customers are treated fairly by following their rules and guidance.
  • 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.

EU and euro area:

  • December 2019: EMMI has published a EURIBOR Transparency Indicators Report - December 2019. The first slide shows that there is significant dependence on “Level 3” of the waterfall (briefly, panel banks’ contributions based on modelling techniques and/or judgment), in particular for 3M, 6M and 12M tenors. The second slide shows the aggregate notional volumes of transactions used in the determination of the five EURIBOR tenors, with significantly lower volumes in the 3M, 6M and 12M tenors.
  • 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.
  • 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:

  • 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.
  • October 2019: The ARRC issued a press release welcoming the US Department of the Treasury and the Internal Revenue Service’s release of proposed regulations providing tax relief related to issues that may arise as a result of the modification of debt, derivative, and other financial contracts from LIBOR-based language to alternative reference rates. The proposed regulations are open for comment until 25 November 2019.
  • 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.

Japan
  • 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.

Switzerland
  • December 2019: The National Working Group on Swiss Franc Reference Rates published an updated starter pack designed to inform readers about the transition from CHF LIBOR to SARON.
  • July 2019: The National Working Group on Swiss Franc Reference Rates published a discussion paper on SARON floating rate notes.

Global:

  • 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.
  • November 2019: The Official Sector Steering Group of the FSB has written to ISDA encouraging it to add a “pre-cessation” trigger alongside the cessation trigger as standard language in the definitions for new derivatives and in a single protocol, without embedded optionality, for outstanding derivative contracts referencing key IBORs. According to the letter, this would help to reduce systemic risk and market fragmentation by ensuring that as much of the swaps market as possible falls back to alternative rates in a coordinated fashion.
  • November 2019: ISDA published a report that summarises responses to a consultation on the final parameters of adjustments that will apply to derivatives fallbacks for certain IBORs. The report follows two earlier consultations that found the overwhelming majority of respondents preferred the ‘compounded setting in arrears rate’ to address differences in tenor between IBORs and overnight risk-free rates, and the ‘historical mean/median approach’ to deal with differences in credit risk and other factors. The new report covers technical issues on specific methodologies for the two adjustments. Responses to the final parameters consultation show that a majority of participants preferred a historical median approach over a five-year lookback period. A majority also preferred not to include a transitional period in the spread adjustment calculation, not to exclude outliers, and not to exclude any negative spreads. For the compounded setting in arrears rate, a clear majority favoured a two-banking-day backward shift adjustment for operational and payment purposes.
  • 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.



Contacts:

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

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 and other key 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

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 and other key 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

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

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