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

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699