DOCSLIB.ORG

LIBOR Transition Virtual Client Briefing Session 8 and 10 December 2020

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
LIBOR Transition Virtual Client Briefing Session 8 and 10 December 2020 PUBLIC LIBOR Transition Virtual Client Briefing Session 8 and 10 December 2020 sc.com | Here for good PUBLIC Introductory Remarks OUR PANEL Kamini Ryan Rambausek Goh Change Lead, Associate Director, IBOR Transition Rates Trading Programme Arpit Tiak Peow Mehrotra Phua Business Lead, Executive Director IBOR Transition Conduct, Financial Programme Crime and Compliance 1 PUBLIC 1. Introduction 1.1 Session Objectives The primary objectives of this virtual briefing session is to update on: ▪ Regulatory and industry working group developments as we progress in the transition away from London Interbank Offered Rate (LIBOR) and other IBORs. ▪ Our Bank’s capabilities to transact in Risk-Free Rates (RFRs) and offer RFR-linked products. 1.2 Key outcomes Help ensure you are kept up to date with the latest transition-related regulatory and market developments. Help you understand the developments in key product groups including the Bank’s RFR product capabilities. Help ensure you are aware of the important elements and considerations in your transition planning. Help ensure you are clear on the next steps on the Bank’s engagement with you as we move into 2021. 2 PUBLIC 2. Transition Timelines: Journey to date 2.1 Key milestones 2017 2018 2019 2020 Q2 The Sterling Overnight Q3 The Financial Conduct Q4 The European Central Q1 SOFR index introduced. Index Average (SONIA) Authority (FCA): “markets Bank (ECB) publishes and the Secured need to end their reliance the Euro Short-Term Overnight Financing on LIBOR post 2021”. Rate (€STR) as RFR to Rate (SOFR) are replace the Euro Q3 Central Counterparty (CCP) announced to replace Overnight Index Average discounting switch from GBP and USD LIBOR (EONIA). EONIA to €STR respectively. Alternative Reference International Swaps and Q3 FCA announces they will Q3 “Dear CEO” letter jointly Q4 Q4 no longer compel banks issued by the FCA and Rate Committee (ARRC) Derivatives Association to submit LIBOR. the Prudential Regulatory publishes summary of (ISDA) 2020 IBOR Authority (PRA) to 15 recommended fallback Fallbacks Supplement market participants. language to date for and Protocol USD cash products. Launch of the IBA Q4 Consultation 3 PUBLIC 2. Transition Timelines: IBA Consultation 2.2 IBA intention to consult on LIBOR setting cessation On 4 December 2020, ICE Benchmark Administration (IBA) has launched a consultation on its intention to cease the publication of LIBOR settings What is the proposed LIBOR publication cessation timeline? The IBA consultation is intended to provide market participants with details on its intention to cease publication of LIBOR settings from the following proposed dates: 31 December 2021 30 June 2023 ▪ EUR LIBOR: All tenors1 All remaining USD LIBOR settings including: ▪ CHF LIBOR: All tenors ▪ USD LIBOR – Overnight, one month, and three, six and twelve months ▪ JPY LIBOR: All tenors ▪ GBP LIBOR: All tenors ▪ USD LIBOR: One week and two month tenors How will the consultation work? The consultation is open to stakeholders including panel banks, industry bodies and end-users, who have until 25 January 2021 to provide feedback. The IBA will then publish a statement shortly afterwards summarising the responses to the consultation for all 35 LIBOR settings. What does this mean for USD LIBOR? If the proposals are adopted, USD LIBOR settings will continue for all but two tenors until 30 June 2023. The FCA has published a statement supporting the IBA announcements, as “this will incentivise swift transition, while allowing time to address a significant proportion of the legacy contracts that reference USD LIBOR”. The Fed has also supported this move, as the IBA and FCA statements “lay out a path forward in which banks should stop writing new USD LIBOR contracts by the end of 2021, while most legacy contracts will be able to mature before LIBOR stops.”. The continued expectation is that for new transactions, market participants should continue to actively transition away from LIBOR to RFR as soon as possible and no later than 31 December 2021. US regulators have also stated that entering into new USD LIBOR contracts after 31 December 2021 would create safety and soundness risks, and that firms should only expect very limited carve-outs for USD LIBOR use after end-2021. The FCA has also indicated that it will consult on restricting use of where a rate has known cessation date 1The tenors are: overnight, one week, one month and two, three, six and 12 months 4 PUBLIC 2. Transition Timelines: IBA Consultation 2.2 IBA intention to consult on USD LIBOR cessation extension Implications for LIBOR and remaining currencies due to IBA consultation Subject to the consultation outcome, what are the implications for clients? Potential Implications ▪ Despite the possible extension to cessation of USD LIBOR, the industry is in the final stages of LIBOR’s demise with the consultation designed to provide additional time to remediate certain existing USD LIBOR contracts ▪ Following the conclusion of the consultation, a cessation announcement or cessation announcements of all tenors of USD, GBP, JPY, CHF and EUR LIBOR settings could trigger the calculation of spread adjustments with a fixing on that announcement date for all of the LIBOR settings ▪ Based on the consultation, USD LIBOR is likely to remain representative until their proposed cessation dates. Firms will need to consider implications arising from these staggered cessation dates ▪ An extension would allow in scope USD LIBOR contracts maturing prior to July 2023 to expire without need for remediation ▪ Clients with USD LIBOR exposures maturing beyond June 2023 are stilll likely to remediate their contracts, pending any solution that may be proposed by the Alternative Reference Rate Committee (ARRC) and/or regulators What should market participants do now? Next steps The extended timeline for certain USD LIBOR settings set out a clear path to support USD LIBOR transition, and should not be viewed as a delay to transition by market participants. As such priorities for firms should remain largely unchanged: New Transactions ▪ Market participants should continue to consider and execute new transactions in Risk-Free Rates (RFRs) where possible, and ahead of industry milestones to stop using LIBOR in new transactions ▪ Where firms trade LIBOR products, they must ensure that appropriate hardwired fallbacks are put into place Existing LIBOR Exposures ▪ Firms should analyse their contracts by tenor and currency to identify the population of USD LIBOR transactions that mature prior to 30 June 2023 and monitor the outcome of the IBA consultation to determine the next steps on these contracts ▪ Develop scenarios and contingency plans for consultation outcomes, such as impacts on transaction pricing, hedging costs, resource requirements for contract remediation and client communications 5 PUBLIC 2. Transition Timelines: Key Upcoming Milestones 2.3 Q4 2020 to End 2023 Regulators and industry bodies have set key milestones to ensure as smooth and orderly transition as possible. Upcoming are: Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q4 2021 Targeted cessation of Targeted cessation of new Complete active Cease offering GBP Expected cessation Expected cessation new USD LIBOR GBP LIBOR cash conversion of LIBOR non-linear and of of USD LIBOR Floating Rate Notes issuances & linear GBP LIBOR cash cross-currency GBP,EUR,JPY,CHF (1w and 2M) (FRN) derivatives products derivatives LIBOR Q4 2021 2022 2023 2020 Q4 2020 Q1 2021 Q2 2021 H1 2021 Q1 2022 H1 2023 KEY INDUSTRY MILESTONES INDUSTRY KEY Expected forward- Effective Date of ISDA Cease new USD LIBOR ARRC EBR Transition Expected cessation looking Term Fallbacks business loans, recommends provisions end of USD LIBOR SONIA Reference Supplement and securitisations and forward-looking (O/N,1M, 3M, 6M Rates Protocol derivatives2 SOFR term rate and 12M) Today ILLUSTRATIVE LIBOR RFR 6 2https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/ARRC-Best-Practices.pdf PUBLIC 3. Updates on Other IBORs 3.1 To Be Discontinued/Discontinued IBORs Beyond the transition of the five key LIBORs, there are a number of other jurisdictions undergoing their own interest rate benchmark review, some of which are noted below. The Reserves Bank of India (RBI) noted a need to replace the Mumbai Interbank Forward Outright Rate India MIFOR (MIFOR), which uses USD LIBOR in its calculation, however no such replacement has been identified to date. The Philippine Interbank Reference Rate (PHIREF) utilises USD LIBOR as a calculation input. However, no Philippines PHIREF alternative has been identified to date. The Bankers Association of the Philippines, PHIREF’s administrator, intends to establish a replacement reference rate for PHIREF. The Singapore Interbank Offered Rate (SIBOR) is pending discontinuation in phases as follows; 12-month IBORs on January 2021, six-month after the end of 2021, one-month and three-month in 2024. The Swap Offer SIBOR & Singapore Rate (SOR) uses USD LIBOR in its calculation and therefore will be affected by a USD LIBOR SOR discontinuation. The Singapore Overnight Rate Average (SORA) has been identified the alternative benchmark The Central Bank decided to stop publishing Sri Lanka Interbank Offered Rate (SLIBOR) from July 2020 and market participants are encouraged to transition to alternative rates such as the policy rate, Average Sri Lanka SLIBOR Weighted Call Money Rate (AWCMR), Average Weighted Prime Lending Rate (AWPR), or Treasury bill yields. The Market Practitioners Group (MPG) raised concerns regarding Johannesburg Interbank Average Rate (JIBAR) in its current form, however until an alternative reference rate can be found, it will be reformed. The JIBAR & South Africa South African Reserve Bank implied that JIBAR may cease in 2024. In addition, the benchmark proposed as SABOR a replacement for South African Benchmark Overnight Rate (SABOR) is the South African Rand Overnight Index Average (ZARONIA), which is an unsecured overnight rate. The Bank of Thailand (BoT) has announced that all financial institutions must cease offering new Thai Baht To Discontinued Be / Discontinued Interest Rate Fixing (THBFIX) products from 1 July 2021.
Load more

Recommended publications
  • Interbank Offered Rates (Ibors) and Alternative Reference Rates (Arrs)
    VERSION: 24 SEPTEMBER 2020 Interbank Offered Rates (IBORs) and Alternative Reference Rates (ARRs) The following table has been compiled on the basis of publicly available information. Whilst reasonable care has been taken to ensure that the information in the table is accurate as at the date that the table was last revised, no warranty or representation is given as to the information in the table. The information in the table is a summary, is not exhaustive and is subject to change. Key Multiple-rate approach (IBOR + RFR) Moving to RFR only IBOR only Basis on Development of Expected/ Expected fall which forward-looking likely fall- back rate to IBOR is Expected ARR? back rate to the ARR (if 3 Expected being Date from date by the IBOR2 applicable) discontinu continued which which ation date (if Alternative ARR will replaceme for IBOR applicable Reference be nt of IBOR Currency IBOR (if any) )1 Rate published is needed ARS BAIBAR TBC TBC TBC TBC TBC TBC TBC (Argentina) 1 Information in this column is taken from Financial Stability Board “Reforming major interest rate benchmarks” progress reports and other publicly available English language sources. 2 This column sets out current expectations based on publicly available information but in many cases no formal decisions have been taken or announcements made. This column will be revisited and revised following publication of the ISDA 2020 IBOR Fallbacks Protocol. References in this column to a rate being “Adjusted” are to such rate with adjustments being made (i) to reflect the fact that the applicable ARR may be an overnight rate while the IBOR rate will be a term rate and (ii) to add a spread.
    [Show full text]
  • LCH Clears First Swaps Referencing SARON
    LCH clears first swaps referencing SARON Migration to new Swiss reference rate comes ahead of discontinuation of TOIS on 29 December 2017 SwapClear has cleared circa CHF 30 trillion in Swiss Franc-denominated interest rate derivatives since the service’s inception Basler Kantonalbank, Credit Suisse and Zürcher Kantonalbank among the first members to clear using the new rate 18 October 2017 LCH, a leading global clearing house, today announced that it is now clearing Swiss Franc (CHF) interest rate swaps referencing SARON, the Swiss average overnight rate. The move comes ahead of the migration of CHF reference interest rates from TOIS to SARON, scheduled for 29 December 2017. Basler Kantonalbank, Credit Suisse and Zürcher Kantonalbank were among the first market participants to begin clearing using the rate. SARON is the new rate to be used for CHF overnight indexed swaps (OIS) and has recently been recommended as the alternative to Swiss Franc LIBOR and TOIS*. LCH has cleared approximately CHF 30 trillion in Swiss Franc-denominated interest rate derivatives since SwapClear started clearing the currency in June 2002. Michael Davie, Global Head of Rates, LCH, said: “The Swiss market is in the vanguard of a global move to new risk-free reference rates, attracting special attention given the Swiss Franc’s reserve currency status. LCH is delighted to have worked closely with our members, their clients and the regulators to effect a smooth and timely transition from TOIS to SARON. As well as clearing OTC derivatives referencing SARON, LCH has adopted this new preferred rate for cash flow discounting and investment benchmarking.
    [Show full text]
  • Replacing the LIBOR with a Transparent and Reliable Index of Interbank Borrowing: Comments on the Wheatley Review of LIBOR Initial Discussion Paper
    Replacing the LIBOR with a Transparent and Reliable Index of Interbank Borrowing: Comments on the Wheatley Review of LIBOR Initial Discussion Paper 6 September 2012 * Rosa M. Abrantes-Metz and David S. Evans *Abrantes-Metz is Adjunct Associate Professor at the Stern School of Business, New York University and a Principal of Global Economics Group; Evans is Executive Director of the Jevons Institute for Competition Law and Economics and Visiting Professor at the University College London, Lecturer at the University of Chicago Law School, and Chairman, Global Economics Group. The authors thank John H. Cochrane, Albert D. Metz, Richard Schmalensee, and Brian Smith for helpful insights. The views expressed are those of the authors and should not be attributed to affiliated institutions or their clients. 1 I. Summary 1. The Wheatley Review released its Initial Discussion Paper (the “Discussion Paper”) on August 10, 2012 and has sought comments on its preliminary findings and recommendations on how to reform the London Interbank Offered Rate (“LIBOR”).1 2. This submission presents an alternative to the LIBOR that would in our view: a. Eliminate or significantly reduce the severe defects in the LIBOR which lead the Discussion Paper to conclude that continuing with the current system is “not a viable option;”2 b. Provide a transparent and reliable measure of interbank lending rates during normal times as well as financial crises; c. Minimize disruptions to the market; and, d. Provide parties relying on the LIBOR with a standard that would maintain continuity with the LIBOR. 3. This alternative, which we call the “Committed” LIBOR (CLIBOR), would: a.
    [Show full text]
  • LIBOR Transition Key Dates
    IBOR Reform Key Dates July 2021 Disclaimer J.P.Morgan does not provide legal, tax, financial or accounting advice and clients should consider any loan amendments and the appropriateness of the fallbacks incorporated therein together with their legal, tax, financial and accounting advisers, taking into consideration their own particular circumstances and the fallbacks that may be applicable in any related products. Please visit the following link for JPMorgan disclosures: https://www.jpmorgan.com/global/disclosures Key IBOR Transition Dates Currency IBOR Settings Permanent Cessation Date1 Cease Trading New IBOR Contracts Select Milestones LIBOR (1-week and 2-month) December 31, 2021 FRB/FDIC/OCC: The agencies encourage banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31st, 2021. The Commodity Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee: ◼ Recommends that on July 26th, 2021 and thereafter, that USD End 2021 (All Products) interdealer trading conventions switch from LIBOR to the LIBOR (Overnight, 1-month, 3- June 30, 2023 Secured Overnight Financing Rate (SOFR) for USD linear month, 6-month, 12-month) interest rate swaps. This is referred to as “SOFR First”. ◼ The SOFR First initiative also recommends keeping interdealer brokers’ screens for LIBOR linear swaps available until October 22nd, 2021, but for information purposes only. After this date, these screens should be turned off.
    [Show full text]
  • Notice of Listing of Products by Icap Sef (Us) Llc for Trading by Certification 1
    NOTICE OF LISTING OF PRODUCTS BY ICAP SEF (US) LLC FOR TRADING BY CERTIFICATION 1. This submission is made pursuant to CFTC Reg. 40.2 by ICAP SEF (US) LLC (the “SEF”). 2. The products certified by this submission are the following: Fixed for Floating Interest Rate Swaps in CNY (the “Contract”). Renminbi (“RMB”) is the official currency of the Peoples Republic of China (“PRC”) and trades under the currency symbol CNY when traded in the PRC and trades under the currency symbol CNH when traded in off-shore markets. 3. Attached as Attachment A is a copy of the Contract’s rules. The SEF is listing the Contracts by virtue of updating the terms and conditions of the Fixed for Floating Interest Rate Swaps submitted to the Commission for self-certification pursuant to Commission Regulation 40.2 on September 29, 2013. A copy of the Contract’s rules marked to show changes from the version previously submitted is attached as Attachment B. 4. The SEF intends to make this submission of the certification of the Contract effective on the day following submission pursuant to CFTC Reg. 40.2(a)(2). 5. Attached as Attachment C is a certification from the SEF that the Contract complies with the Commodity Exchange Act and CFTC Regulations, and that the SEF has posted a notice of pending product certification and a copy of this submission on its website concurrent with the filing of this submission with the Commission. 6. As required by Commission Regulation 40.2(a), the following concise explanation and analysis demonstrates that the Contract complies with the core principles of the Commodity Exchange Act for swap execution facilities, and in particular Core Principle 3, which provides that a swap execution facility shall permit trading only in swaps that are not readily susceptible to manipulation, in accordance with the applicable guidelines in Appendix B to Part 37 and Appendix C to Part 38 of the Commission’s Regulations for contracts settled by cash settlement and options thereon.
    [Show full text]
  • APAC IBOR Transition Benchmarking Study
    R E P O R T APAC IBOR Transition Benchmarking Study. July 2020 Banking & Finance. 0 0 sia-partners.com 0 0 Content 6 • Executive summary 8 • Summary of APAC IBOR transitions 9 • APAC IBOR deep dives 10 Hong Kong 11 Singapore 13 Japan 15 Australia 16 New Zealand 17 Thailand 18 Philippines 19 Indonesia 20 Malaysia 21 South Korea 22 • Benchmarking study findings 23 • Planning the next 12 months 24 • How Sia Partners can help 0 0 Editorial team. Maximilien Bouchet Domitille Mozat Ernest Yuen Nikhilesh Pagrut Joyce Chan 0 0 Foreword. Financial benchmarks play a significant role in the global financial system. They are referenced in a multitude of financial contracts, from derivatives and securities to consumer and business loans. Many interest rate benchmarks such as the London Interbank Offered Rate (LIBOR) are calculated based on submissions from a panel of banks. However, since the global financial crisis in 2008, there was a notable decline in the liquidity of the unsecured money markets combined with incidents of benchmark manipulation. In July 2013, IOSCO Principles for Financial Benchmarks have been published to improve their robustness and integrity. One year later, the Financial Stability Board Official Sector Steering Group released a report titled “Reforming Major Interest Rate Benchmarks”, recommending relevant authorities and market participants to develop and adopt appropriate alternative reference rates (ARRs), including risk- free rates (RFRs). In July 2017, the UK Financial Conduct Authority (FCA), announced that by the end of 2021 the FCA would no longer compel panel banks to submit quotes for LIBOR. And in March 2020, in response to the Covid-19 outbreak, the FCA stressed that the assumption of an end of the LIBOR publication after 2021 has not changed.
    [Show full text]
  • LIBOR Transition Market Update: July 16
    LIBOR Transition Market update: July 16 - 31, 2020 518 days to December 31, 2021 1 - Highlights - €STR discounting switch in the books 1 Highlights — SOFR up next €STR discounting switch in the books — SOFR up next - ECB report: banks generally behind What happened? A key milestone in the transition to new schedule RFRs in the Euro markets has been completed, as the central - ARRC’s syndicated loan conventions: counterparty (CCP) clearinghouses have switched from Choose your own adventure? EONIA to €STR as the rate for calculation of price alignment interest (the interest paid on collateral) for EUR-denominated - EC legislative proposal to address interest rate swaps and consequently discounting future cash legacy contracts that cannot be flows. Indications are that the switch was accomplished transitioned without major issues. - ECB’s plans to publish compound €STR The eyes of the financial world now turn to the USD averages derivatives markets, as market participants prepare for the corresponding switch for cleared USD interest rate derivatives - SIBOR no more? SORA proposed as from the effective federal funds rate (EFFR) to SOFR, main benchmark in Singapore scheduled for the weekend of October 17, 2020. At the CFTC’s last Market Risk Advisory Committee (MRAC) 2 – RFR adoption: Derivatives meeting, the subcommittee on interest rate benchmark reform delivered a report summarizing the learnings from a recent - Futures and options tabletop exercise on the discounting switch conducted earlier - Swaps trading this year: - Enhanced education is needed for all involved parties. 3 – RFR adoption: Cash products - Risk mitigation strategies should be considered in advance of the discounting switch.
    [Show full text]
  • LIBOR Transition - Impacts to Corporate Treasury
    LIBOR Transition - Impacts to Corporate Treasury April 2019 What is happening to LIBOR? London Interbank Offered Rate (LIBOR) is a benchmark rate that some of the world’s leading banks charge each other for unsecured loans of varying tenors. In 2017, Financial Conduct Authority stated that it will no longer compel banks to submit LIBOR data to the rate administrator post 2021 resulting in a clear impetus and need to implement alternative risk-free rates (RFR) benchmarks globally. End of LIBOR LIBOR transition 2019 - 2021 Post 2021 Risk-free rates SOFR (U.S.) LIBOR (RFR) Phase-out RFRs • an unsecured rate at which banks and SONIA (U.K.) • rates based on secured or unsecured ostensibly borrow from one another transactions replace ESTER (E.U.) • a rate of multiple maturities with… • overnight rates • a single rate Other RFRs… • different rates across jurisdictions How about HIBOR? Unlike LIBOR, the HKMA currently has no plan to discontinue HIBOR. The Treasury Market Association (TMA) has proposed to adopt the HKD Overnight Index Average (HONIA) as RFR for a contingent fallback and will consult industry stakeholders later in 2019. © 2019 KPMG Advisory (Hong Kong) Limited, a Hong Kong limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. 2 How do I know who is impacted? Do you have any floating rate Do you have any derivative loans, bonds, or other similar contracts (e.g. interest rate Do you need to calculate financialEnsure they instruments have difficult with swap) with an interest leg market value of financial an interestconversations rate referenced to referenced to LIBOR? positions (e.g.
    [Show full text]
  • A Quick Guide to the Transition to Risk-Free Rates in the International Bond Market
    A quick guide to the transition to risk-free rates in the international bond market 27 February 2020 A quick guide to the transition to risk-free rates in the international bond market February 2020 1 Disclaimer This paper is provided for information purposes only and should not be relied upon as legal, financial, or other professional advice. While the information contained herein is taken from sources believed to be reliable, ICMA does not represent or warrant that it is accurate or complete and neither ICMA, nor its employees, shall have any liability arising from or relating to the use of this publication or its contents. © International Capital Market Association (ICMA), Zurich, 2020. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission from ICMA. A quick guide to the transition to risk-free rates in the international bond market February 2020 2 Introduction This Quick Guide is intended to highlight the key issues on which ICMA is focused in the transition from IBORs to alternative near risk-free reference rates (“RFRs”) in the international bond market (including floating rate notes (“FRNs”), covered bonds, capital securities, securitisations and structured products, together, “bonds”); and provide links to relevant resources. More information is available on the ICMA benchmark reform and transition to RFRs webpage and from the ICMA contacts listed below. This Quick Guide reflects the position as at its date, but market participants should note that there
    [Show full text]
  • Minutes, Please See Page 4 Ff.)
    Press release (For meeting minutes, please see page 4 ff.) National Working Group on Swiss Franc Reference Rates [email protected] Zurich, 2 July 2021 Executive summary of the 1 July 2021 meeting of the National Working Group on Swiss Franc Reference Rates The National Working Group on Swiss Franc Reference Rates (NWG) met on 1 July 2021 to discuss the progress of the LIBOR transition in Switzerland and relevant international developments. The key items and main recommendations of yesterday’s meeting were: (i) Members reviewed important milestones regarding the transition from LIBOR. First, ICE Benchmark Administration (IBA) and the UK Financial Conduct Authority (FCA) released on 5 March 2021 their statements confirming that all Swiss franc (CHF) LIBOR settings will cease immediately after the LIBOR publication on 31 December 2021. Second, with the publication of the IBA statement, ISDA adjustment spreads for all LIBOR settings were fixed. There will be no synthetic rate for CHF LIBOR. (ii) FINMA provided an update on their self-assessment survey, according to which a large fraction of the cash market already transitioned to SARON but some market participants still need to accelerate their reduction of legacy LIBOR contracts. Furthermore, FINMA emphasized that it is important to timely meet the deadlines of the FINMA Guidance 10/2020 (LIBOR transition roadmap). After 30 June 2021, new contracts should in general be based on alternative reference rates (e.g. SARON and SOFR). FINMA reminded members that full operational readiness is required by 31 December 2021. (iii) Regarding options for using compounded SARON, members reviewed the guidance given so far.
    [Show full text]
  • My Company Has an Existing Loan That References SOR and Matures After End 2021
    PUBLIC FRENQUENTLY ASKED QUESTIONS FAQs FOR CORPORATES LOANS – EXISTING/LEGACY Q1: My company has an existing loan that references SOR and matures after end 2021. What should I do about this? There is no immediate impact on your loan at this juncture, and your bank will be reaching out to you in due course to assist with the transition. However, to prepare for the upcoming transition, you are encouraged to review the terms and conditions of your loan contract to understand the implications and the actions required. Q2. Can my bank just replace my SOR loan pricing to SIBOR (or enhanced SIBOR)? Your bank will be writing to you at the appropriate time to consider different options. You will have the ability to choose the right loan package that best meets your needs. You will also need to consider if replacing a SOR loan with other benchmarks impacts your related transactions (e.g. hedges) and the corresponding accounting and tax implications. SORA and SIBOR are different SGD benchmarks that are determined on a different basis. In relation to the usage of SIBOR, ABS Benchmarks Administration Pte Ltd (ABS Co) is conducting a transitional testing for the enhanced SIBOR, and will provide an update after the transitional testing is completed in 2H 2020. The results of the transitional testing will be considered by the Steering Committee for SOR Transition to SORA (SC-STS), which will issue industry guidance in due course. While SORA is not commonly used in the loan market, it is not new and has been published daily by the MAS since 2005.
    [Show full text]
  • Product Specific Contract Terms and Eligibility Criteria Manual
    PRODUCT SPECIFIC CONTRACT TERMS AND ELIGIBILITY CRITERIA MANUAL CONTENTS Page SCHEDULE 1 REPOCLEAR ................................................................................................... 3 Part A Repoclear Contract Terms: Repoclear Contracts arising from Repoclear Transactions, Repo Trades or Bond Trades .......................................................... 3 Part B Product Eligibility Criteria for Registration of a RepoClear Contract ................... 9 Part C Repoclear Term £GC Contract Terms: Repoclear term £GC Contracts Arising From Repoclear Term £GC Transactions Or Term £GC Trades ........................ 12 Part D Product Eligibility Criteria for Registration of a RepoClear Term £GC Contract ............................................................................................................................. 19 SCHEDULE 2 SWAPCLEAR ................................................................................................ 21 Part A Swapclear Contract Terms ................................................................................... 21 Part B Product Eligibility Criteria for Registration of a SwapClear Contract ................ 36 SCHEDULE 3 EQUITYCLEAR ............................................................................................. 46 Part A EquityClear (Equities) Contract Terms ................................................................ 46 Part B EquityClear Eligible (Equities) ............................................................................ 48 Part C EquityClear
    [Show full text]