Featured Product

    ISDA Updates Product Table on RFR Conventions and IBOR Fallbacks

    September 28, 2020

    ISDA has amended the standard documentation for interest rate derivatives that reference key interbank offered rates (IBORs) to include information on fallback rates that will apply on the permanent discontinuation of these IBORs and, in the case of LIBOR, if LIBOR becomes "non-representative." The amended document includes a table that sets out how the fallbacks would function for different products, including certain non-linear products. For comparison, the chart sets out standard conventions for the same products that reference IBORs and the standard and/or expected conventions for such products that reference risk-free rates (RFRs) as of the date of the document. ISDA has also published a set of frequently asked questions (FAQs) on IBOR fallback rate adjustments.

    Counterparties may include the amended documentation with the fallback triggers and rates in their legacy transactions by either adhering to a "protocol" published by ISDA or entering into bilateral amendments. The fallback rates referenced in the amended documentation will be as published by Bloomberg for the relevant IBOR and tenor. The amended ISDA documentation will direct counterparties to first apply linear interpolation if the relevant IBOR is available for the next longer and next shorter tenor. If linear interpolation is not available, counterparties are directed to use the published fallback rate that corresponds to the date on which they were to reference the relevant IBOR, provided that this fallback rate appears on the relevant screen at least two business days prior to the relevant payment date. If the fallback rate for the referenced IBOR’s original fixing date is not produced by Bloomberg two business days prior to the payment date, then the amended documentation of ISDA provides for counterparties to reference the fallback rate that has been published for the most recent original fixing date for the relevant IBOR in the relevant tenor.

    ISDA has produced language that counterparties could use to replace the fallbacks with triggers and fallbacks that duplicate those in hedged instruments. For certain products, counterparties may want to consider whether to amend the business days or payment dates and/or agree to use a fallback rate for a date other than the referenced IBOR’s original fixing date. In some cases, such amendments may better align the outcomes with the counterparties’ original intentions and/or with the desired outcomes for hedged instruments. Any such amendments would be strictly based on agreements between the relevant counterparties. The documentation of each  transaction remains the responsibility of the parties concerned.

     

    Related Links

    Keywords: International, Banking, Securities, Interest Rate Benchmarks, IBOR, Derivatives, Risk-Free Rate, LIBOR, Benchmark Reforms, Benchmark Fallbacks ISDA

    Related Articles
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    ECB to Consider Climate Risks When Reviewing Collateral Framework

    In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.

    September 17, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    ACPR Publishes Corrective Version of RUBA Taxonomy

    The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7483