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

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News
    News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 07, 2022 WebPage Regulatory News
    News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News
    News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7860