LIBOR Transition
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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. -
LIBOR Transition - Legislative Solutions
LIBOR Transition - Legislative Solutions FIA Conference LIBOR: Where Are We and Where Are We Going? April 28-29, 2021 Authors Deborah North, Partner David Wakeling, Partner James Bryson Leland Smith Tough legacy proposals Overview of Proposed Legislative Measures Targeting “tough legacy” contracts Potential legislative solutions in UK and US, as well as published legislation in the EU and NY ‒ UK proposals remain moving targets ‒ NY solution is law; US federal solution likely ‒ UK goes to source ‒ US and EU change contract terms ‒ Mapping the differences ‒ Safe harbors Others? © Allen & Overy LLP | LIBOR Transition – Legislative Solutions 1 Tough legacy proposals Mapping Differences Based on Current Proposals EU (Regulation (EU) 2021/168 of the European Parliament and of the Council amending Regulation (EU) 2016/1011(EU BMR), Proposal US (NY) dated February10, 2021 (and effective from February 13, 2021) UK (Financial Services Bill) Scope USD LIBOR only. Potentially all LIBORs. Currently expected to be certain tenors of GBP, JPY, and All NY law contracts with no Contracts USD LIBOR (subject to further consultation). fallbacks or fallbacks to LIBOR- a) without fallbacks All contracts which reference the relevant LIBOR. FCA based rates (e.g. last quoted b) no suitable fallbacks (fallbacks deemed unsuitable if: (i) don't cover discretion to effect LIBOR methodology changes as it LIBOR/dealer polls). appears on screen page. Widest extra-territorial impact (but permanent cessation; (ii) their application requires further consent Fallbacks to a non-LIBOR from third parties that has been denied; or (iii) its application no may be trumped by the contractual fallbacks or the US/EU legislation to the extent of their territorial reach). -
LIBOR Transition: SOFR, So Good Implications of a New Reference Rate for Your Business • 2021
LIBOR transition: SOFR, so good Implications of a new reference rate for your business • 2021 Contents What is LIBOR? 2 What fallback language is currently in place? 16 Why does LIBOR have to go? 4 How will derivative contracts be impacted? 17 Who is driving the process? 5 How will loans and bonds be impacted? 19 How can LIBOR be replaced? 7 How is Wells Fargo contributing? 21 What should I know about SOFR? 9 Where can I get further information? 22 Why are repo transactions so important? 10 Contacts 22 How can SOFR fill LIBOR’s big shoes? 11 What is LIBOR? A brief history of the London Interbank Offered Rate The London Interbank Offered Rate (LIBOR) emerged in How is LIBOR set? the 1980s as the fast-growing and increasingly international financial markets demanded aconsistent rate to serve as • 11 – 16 contributor banks submit rates based on a common reference rate for financial contracts. A Greek theoretical borrowing costs banker is credited with arranging the first transaction to • The top 25% and bottom 25% of submissions are be based on the borrowing rates derived from a “set of thrown out reference banks” in 1969.¹ • Remaining rates are averaged together The adoption of LIBOR spread quickly as many market participants saw the value in a common base rate that could underpin and standardize private transactions. At first, the rate was self-regulated, but in 1986, the British 35 LIBOR rates published at 11:00 a.m. London Time Bankers’ Association (BBA), a trade group representing 5 currencies (USD, EUR, GBP, JPY, CHF) with the London banks, stepped in to provide some oversight. -
The Euro and Currency Unions October 2011 2 the Euro and Currency Unions | October 2011
GLOBAL LAW INTELLIGENCE UNIT The euro and currency unions October 2011 www.allenovery.com 2 The euro and currency unions | October 2011 Key map of jurisdictions © Allen & Overy LLP 2011 3 Contents Introduction 4 Map of world currencies 4 Currency unions 5 Break-up of currency unions 6 Break-up of federations 6 How could the eurozone break up? 6 Rights of withdrawal from the eurozone 7 Legal rights against a member withdrawing from the eurozone unilaterally 7 What would a currency law say? 8 Currency of debtors' obligations to creditors 8 Role of the lex monetae if the old currency (euro) is still in existence 9 Creditors' rights of action against debtors for currency depreciation 10 Why would a eurozone member want to leave? - the advantages 10 Why would a eurozone member want to leave? - the disadvantages 11 History of expulsions 12 What do you need for a currency union? 12 Bailing out bankrupt member states 13 European fire-power 14 Are new clauses needed to deal with a change of currency? 14 Related contractual terms 18 Neutering of protective clauses by currency law 18 Other impacts of a currency change 18 Reaction of markets 19 Conclusion 20 Contacts 21 www.allenovery.com 4 The euro and currency unions | October 2011 Allen & Overy Global Law Intelligence Unit The euro and currency unions October 2011 Introduction The views of the executive of the Intelligence Unit as to whether or not breakup of the eurozone currency union This paper reviews the role of the euro in the context of would be a bad idea will appear in the course of this paper. -
Libor's Long Goodbye
LIBOR’S LONG GOODBYE Readiness for LIBOR transition TRANSACTIONAL POWERHOUSE 1 CASE0155238_Report_Print Ready.indd 1 21/07/2020 12:06:23 Introduction As has been noted in a continuous drumbeat of warnings from major global, regional and local regulatory bodies, LIBOR is expected to go away at the end of 2021, when the UK Financial Conduct Authority (FCA) has announced it will withdraw support for the rate. This deadline was first announced This report also includes a matrix written, in each case that mature in a speech by Andrew Bailey, chief showing an assessment of readiness after 2021. The official sector executive of the FCA, in July 2017. for transition by currency and product of regulators and central banks Since more than half of the roughly type. As we’ve noted previously, continues to stress the need to four-and-a-half-year-period that that LIBOR transition is at different develop robust alternative reference speech gave until the deadline has stages of progress in different rates and robust contractual fallbacks now elapsed, it is perhaps fitting to jurisdictions and with respect to in the event that LIBOR were to consider how far markets have come different financial products. cease or become unrepresentative in LIBOR transition, and how much of underlying financial reality, and to further they need to go. LIBOR transition remains a transition to such alternative rates. fundamental issue confronting Despite the uncertainty that exists, the This report assesses the state of financial markets. To date, transition FCA has stated firmly that the end-2021 readiness for transition from LIBOR has been slower than regulators deadline remains in effect, a statement (and other interbank offered rates would like, and considerable it reiterated on 25 March 2020 in (IBORs)) to alternative interest rates uncertainty still exists (and may response to the Covid-19 pandemic. -
2021: a Defining Moment for the Interest Rates Reform City Week 2020 – London
21 September 2020 ESMA80-187-627 2021: A Defining Moment for The Interest Rates Reform City Week 2020 – London Steven Maijoor Chair European Securities and Markets Authority Introduction Good morning Ladies and Gentlemen, It is my great pleasure to participate today in the City Week 2020 forum. The interest rates reform is one of the key challenges that the global financial system is currently facing. Therefore, I would like to thank City & Financial Global and the other institutions involved in the organisation of this forum for inviting me and for including in the agenda a panel discussion on this very important matter. Today, before participating in the panel discussion, I would like to speak about recent and expected developments of the global interest rates reform and the crucial role that the cooperation between public authorities and the financial industry is playing in this process. €STR: the new risk-free rate for the euro area As Chair of a European Authority, please allow me to start with an overview of interest rates transition in the euro area and the challenges that lie ahead of us. ESMA • 201-203 rue de Bercy • CS 80910 • 75589 Paris Cedex 12 • France • Tel. +33 (0) 1 58 36 43 21 • www.esma.europa.eu We are soon approaching the first-year anniversary of the Euro Short-Term Rate, or €STR1, which has been published by the ECB since 2nd October 2019. This rate is arguably the core element of the interest rate reform in the euro area, and I will try to explain why this is the case. -
The Pound Sterling
ESSAYS IN INTERNATIONAL FINANCE No. 13, February 1952 THE POUND STERLING ROY F. HARROD INTERNATIONAL FINANCE SECTION DEPARTMENT OF ECONOMICS AND SOCIAL INSTITUTIONS PRINCETON UNIVERSITY Princeton, New Jersey The present essay is the thirteenth in the series ESSAYS IN INTERNATIONAL FINANCE published by the International Finance Section of the Department of Economics and Social Institutions in Princeton University. The author, R. F. Harrod, is joint editor of the ECONOMIC JOURNAL, Lecturer in economics at Christ Church, Oxford, Fellow of the British Academy, and• Member of the Council of the Royal Economic So- ciety. He served in the Prime Minister's Office dur- ing most of World War II and from 1947 to 1950 was a member of the United Nations Sub-Committee on Employment and Economic Stability. While the Section sponsors the essays in this series, it takes no further responsibility for the opinions therein expressed. The writer's are free to develop their topics as they will and their ideas may or may - • v not be shared by the editorial committee of the Sec- tion or the members of the Department. The Section welcomes the submission of manu- scripts for this series and will assume responsibility for a careful reading of them and for returning to the authors those found unacceptable for publication. GARDNER PATTERSON, Director International Finance Section THE POUND STERLING ROY F. HARROD Christ Church, Oxford I. PRESUPPOSITIONS OF EARLY POLICY S' TERLING was at its heyday before 1914. It was. something ' more than the British currency; it was universally accepted as the most satisfactory medium for international transactions and might be regarded as a world currency, even indeed as the world cur- rency: Its special position waS,no doubt connected with the widespread ramifications of Britain's foreign trade and investment. -
FTSE Currency FRB Index Series Ground Rules Developed with Record Currency Management V2.8
Ground Rules FTSE Currency FRB Index Series Ground Rules Developed with Record Currency Management v2.8 ftserussell.com An LSEG Business April 2021 Contents 1.0 Introduction .................................................................... 3 1.0 Overview ........................................................................................... 3 1.9 FTSE Russell .................................................................................... 4 2.0 Management Responsibilities ....................................... 5 2.0 FTSE International Limited (FTSE) ................................................ 5 2.3 Amendments to These Ground Rules ........................................... 5 3.0 FTSE Russell Index Policies ......................................... 6 3.1 Queries and Complaints ................................................................. 6 3.4 FTSE Russell Policy for Benchmark Methodology Changes ...... 6 4.0 Eligible Currencies ....................................................... 7 5.0 Periodic Review of Currencies ..................................... 8 5.1 Review Dates .................................................................................... 8 5.2 Calculation of Spot and Forward Mid Rates ................................. 8 6.0 Index Calculation ......................................................... 11 Interest rates used in the calculations .................................................... 13 Historic interest rates and sources ......................................................... 13 Current -
John Hurley: the Monetary Policy and Operational Framework of the Eurosystem
John Hurley: The monetary policy and operational framework of the Eurosystem Address by Mr John Hurley, Governor of the Central Bank of Ireland, to ACI Ireland (Financial Market Association), Dublin, 12 February 2003. * * * Introduction I welcome the opportunity to address you here tonight. The ACI plays an important role in representing the interest of financial markets and in actively promoting the educational interests of its members. This raises the level of professionalism of the members and contributes to the smooth and orderly operation of financial markets. I would like to concentrate this evening on the ECB dimension of the work of the Bank. I will begin by talking about the work of the Governing Council, and then go on to focus on monetary policy. Finally, I will talk about monetary policy implementation and the role that Ireland has played in the process. Since I became a member of the Governing Council, I have been struck by two things in particular. The first is the breadth of its activities. Admittedly what are described as its basic tasks go well beyond the primary functions of the ECB. Still the range and depth of discussion in such areas as payment and settlement systems, foreign reserve management, production and issue of bank notes, statistics and so on was quite surprising; and this was following lengthy and detailed preparatory work by the Executive Board and by the twelve committees that work to the Governing Council. Secondly, there is the democratic way in which the Governing Council goes about its business. In a sense one should not be surprised by this; the Statute of the ESCB provides for each member to have one vote and specifically restricts weighted voting to financial matters, and Treaty Article 107 is designed to ensure that Governors are not influenced by national considerations. -
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. -
SIFMA Insights: SOFR Primer
Executive Summary SIFMA Insights: Secured Overnight Financing Rate (SOFR) Primer The transition away from LIBOR July 2019 SIFMA Insights Page | 1 Executive Summary Contents Executive Summary ................................................................................................................................................................................... 4 The Transition Away from LIBOR ............................................................................................................................................................... 6 What is LIBOR? .......................................................................................................................................................................................... 6 Why Is LIBOR Important?........................................................................................................................................................................... 8 Why Transition to New Reference Rates, Away from LIBOR? ................................................................................................................... 9 Who Is Impacted by the Transition? ........................................................................................................................................................... 9 US Transition Plan ................................................................................................................................................................................... 11 Establishing the ARRC ............................................................................................................................................................................ -
LIBOR Transition
JUNE 2021 LIBOR Transition AT A GLANCE WHAT IS LIBOR? Following guidance from the Financial Stability Board (FSB), regulatory led public/private working groups Interbank Offered Rates (IBORs), commonly referred were established to identify and promote adoption to as the London Interbank Offered Rate (LIBOR), are of robust alternate risk free rates (ARFRs) that were systemically important interest rate benchmarks, aimed based on substantial underlying transactions to at providing an indication of the average rates at which replace the various LIBOR currency rates. Most RFRs banks can obtain unsecured funding from each other were created as a response to the end of LIBOR; while in various currencies. Various regulatory authorities SONIA, which was historically referenced on overnight have announced their support for a reduced reliance on transactions, was reformed. IBORs, with cessation dates starting at the end of 2021, detailed in Figure 1. LIBOR has often been used in the industry as an interest rate benchmark rate for various LIBOR VERSUS RFR financial products ranging from capital markets to lending products including mortgages. LIBOR RFR In addition to LIBOR cessation, other benchmarks Term Term rate An overnight rate such as EONIA (Euro Overnight Index Average) will be benchmark e.g. (with no existing ceasing publication on 3 January 2022 and there are 3M, 6M, 1Y term structure)1 a number of other benchmarks that reference LIBOR in their calculations, which will be reformed, including View Forward-looking Backward-looking SOR (Singapore Dollar Offer Rate) and THBFIX (Thai Baht Fix). Secured? Unsecured Some based on a secured overnight rate, others WHAT ARE RISK FREE RATES (RFRS)? unsecured RFRs are interest rate benchmarks that seek to Credit Risk Embedded credit Near to risk free, measure the overnight cost of borrowing cash by risk component as there is no bank banks, underpinned by actual transactions.