“Today’s announcement constitutes an index cessation event under the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol for all 35 LIBOR settings. .."
As a result, the fallback spread adjustment published by Bloomberg is fixed as of the date of the announcement for all euro, sterling, Swiss franc, US dollar and yen LIBOR settings...."ISDA has published the following statement in response to today’s announcement by the UK Financial Conduct Authority (FCA) on the future cessation and loss of representativeness of the LIBOR benchmarks.
“The FCA specifically announced that certain LIBOR settings (all
seven euro and Swiss franc LIBOR tenors, overnight, one-week, two-month
and 12-month sterling LIBOR, spot next, one-week, two-month and 12-month
yen LIBOR, and one-week and two-month US dollar LIBOR) will permanently
cease immediately after December 31, 2021. Publication of the overnight
and 12-month US dollar LIBOR settings will permanently cease
immediately after June 30, 2023.
“The FCA further announced that it will consult on requiring ICE
Benchmark Administration (IBA), the administrator of LIBOR, to continue
publishing one-month, three-month and six-month sterling LIBOR on a
non-representative, synthetic basis for a further period after the end
of 2021, and one-month, three-month and six-month yen LIBOR on a
non-representative, synthetic basis for an additional year after
end-2021, under proposed new powers included in the Financial Services
Bill.
“The FCA will also consider whether to require IBA to continue
publishing one-month, three-month and six-month US dollar LIBOR on a
non-representative, synthetic basis for a further period after the end
of June 2023.
“The fallbacks (ie, to the adjusted risk-free rate plus spread) will
automatically occur for outstanding derivatives contracts that
incorporate the IBOR Fallbacks Supplement or are subject to adherence of
the ISDA 2020 IBOR Fallbacks Protocol on the following dates:
- After December 31, 2021: For outstanding derivatives referenced to all euro, sterling, Swiss franc and yen LIBOR settings.
- After June 30, 2023: For outstanding derivatives referenced to all
US dollar LIBOR settings. Under the fallbacks methodology, the rate for
the one-week and two-month US dollar LIBOR settings will be computed by
each calculation agent using linear interpolation between end-2021 and
June 30, 2023, before falling back to the adjusted risk-free rate plus
spread after June 30, 2023.
“The ISDA 2020 IBOR Fallbacks Protocol, which incorporates the
fallbacks into legacy non-cleared derivatives trades with other
counterparties that choose to adhere to the protocol, remains open for
adherence on the ISDA website.”
This statement is for information purposes only. It does not
constitute legal advice and should not be considered an explanation of
all relevant issues. You should consult your legal advisors and any
other advisor you deem appropriate in considering the issues discussed
herein.
For additional information on benchmark reform, including the operation of new derivatives fallbacks, visit ISDA’s benchmark reform and transition from LIBOR page on the ISDA website.
Read ISDA Guidance on the FCA announcement on the LIBOR benchmarks here.
Read the Bloomberg technical notice on the fixing of the spread adjustment here.
ISDA
As a result, the fallback spread adjustment published by Bloomberg is fixed as of the date of the announcement for all euro, sterling, Swiss franc, US dollar and yen LIBOR settings...."
© ISDA - International Swaps and Derivatives Association
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