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    ISDA Outlines Results of Consultation on Pre-Cessation LIBOR Fallbacks

    April 15, 2020

    ISDA announced preliminary results of the consultation on implementation of pre-cessation fallbacks for derivatives referenced to LIBOR. The consultation took place from February 25, 2020 to April 01, 2020. The initial results indicate that a significant majority of respondents are in favor 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 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. A final report analyzing the consultation results and information on next steps will be available in the coming weeks.

    ISDA has been working on an initiative at the request of the Official Sector Steering Group of FSB since 2016 to identify robust fallbacks for derivatives contracts that reference certain key IBORs. This request covered fallbacks that would take effect if an IBOR is permanently discontinued. ISDA conducted several industry consultations in 2018 and 2019 to finalize the methodology for fallbacks. One consultation on pre-cessation fallbacks was issued in May 2019, which resulted in a lack of consensus on the implementation of pre-cessation fallbacks. The recently published results are from the second ISDA consultation on pre-cessation fallbacks, which was published on February 25, 2020.


    Related Link: Press Release


    Keywords: International, Banking, Securities, Fallback Provisions, ISDA Definitions, IBORs, LIBOR, Pre-Cessation Triggers, ISDA

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