HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon. ISDA has announced that it will publish the IBOR Fallbacks Protocol and Supplement on October 23, 2020 and that the Protocol and the Supplement will take effect on January 25, 2021. The Protocol and the Supplement will help to implement fallbacks for existing and new derivatives contracts referencing key interbank offered rates (IBORs).
HKMA expects authorized institutions to adhere to the Protocol before it takes effect and take proactive steps to encourage their counterparties to do the same. For existing LIBOR-linked derivatives contracts to which the Protocol is not applicable, authorized institutions should continue to work with their counterparties to transition to alternative reference rates. As for new derivatives contracts, all those referencing the 2006 ISDA Definitions and executed on or after January 25, 2021 will automatically incorporate fallbacks. HKMA had earlier requested authorized institutions to endeavor to include adequate fallback provisions in all newly issued LIBOR-linked contracts that will mature after 2021, from January 01, 2021. In the light of the latest development, authorized institutions may achieve this transition milestone for derivatives contracts within January 2021.
Keywords: Asia Pacific, Hong Kong, Banking, LIBOR, Benchmark Reforms, Fallback Protocol, IBOR, ISDA, HKMA
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