BoE confirms daily publication of SONIA compounded index from August 2020: impact on new vs legacy cash products

The latest development in the Bank of England’s (BoE) attempts to support the adoption of SONIA in cash products – and to speed up the transition away from LIBOR-linked products – is the publication of its response to the consultation it conducted into the publication of a SONIA index: Supporting Risk-Free Rate transition through the provision of compounded SONIA: summary and response to market feedback (June 2020). Read more

UK Tough Legacy Taskforce recommends LIBOR legislative fix: key risks and next steps

This article was originally published on Banking Litigation Notes. The UK’s Tough Legacy Taskforce (Taskforce) has issued a paper on “tough legacy” issues in the transition from LIBOR. In an important intervention, it has recommended a legislative fix for all asset classes and possibly all LIBOR currencies. The scope of the recommendation from the Taskforce … Read more

ISDA releases report explaining final results of LIBOR consultation on pre-cessation fallbacks: the nuance behind the consensus

This article was originally published on Banking Litigation Notes. We commented last month on the announcement from the International Swaps and Derivatives Association (ISDA), confirming the preliminary results of its re-consultation on the implementation of pre-cessation fallbacks for derivatives referenced to LIBOR: ISDA pre-cessation fallback consensus: will this reduce legacy LIBOR risk in the derivatives … Read more

ISDA releases report explaining final results of LIBOR consultation on pre-cessation fallbacks: the nuance behind the consensus

We commented last month on the announcement from the International Swaps and Derivatives Association (ISDA), confirming the preliminary results of its re-consultation on the implementation of pre-cessation fallbacks for derivatives referenced to LIBOR: ISDA pre-cessation fallback consensus: will this reduce legacy LIBOR risk in the derivatives market? ISDA has now published a report summarising the responses received from the industry to the consultation, and it makes for very interesting reading. Read more

LIBOR Transition: Is ARRC’s Proposed Legislative Fix Constitutional?

This article was originally published on Banking Litigation Notes. In early March, 2020, the Alternative Reference Rates Committee (ARRC) in the US published a proposal for New York legislation to assist the transition of financial contracts away from US dollar (USD) LIBOR. In a blog post in March, HSF provided an overview of this proposal … Read more

LIBOR transition: The risks of interim milestone delay for the cash market due to COVID-19

The Working Group on Sterling Risk-Free Reference Rates (RFRWG) has published a further statement on the impact of COVID-19 for firms’ LIBOR transition plans. The latest statement follows the earlier joint statement made by the FCA, Bank of England and RFRWG on 25 March 2020, in which the regulators set out their initial response to the impact of COVID-19 on transition plans. In this blog post we consider the specific delays to interim LIBOR transition milestones that have been announced, the likely effect such delay is likely to have on loan market LIBOR transition and how this may impact the profile of the associated litigation risks. Read more

ISDA pre-cessation fallback consensus: will this reduce legacy LIBOR risk in the derivatives market?

The International Swaps and Derivatives Association (ISDA) has announced the preliminary results of its re-consultation on the implementation of pre-cessation fallbacks for derivatives referenced to LIBOR (see press release). It follows an earlier consultation on pre-cessation fallbacks last year, which failed to achieve market consensus on whether or not (and if so, how) to include a pre-cessation trigger (see the consultation and the results), causing a delay to the development of a way forward in the critical derivatives market. See our previous blog post on ISDA’s decision to carry out a second consultation. Read more

LIBOR transition: What does the US regulator’s proposed legislative fix mean for UK financial markets?

The Alternative Reference Rates Committee (ARRC) in the US has published a proposal for New York legislation to assist the transition of financial contracts away from US dollar (USD) LIBOR:  Proposed Legislative Solution to Minimize Legal Uncertainty and Adverse Economic Impact Associated with LIBOR Transition (see the ARRC press release). The legislation is not yet final, but has been published by the ARRC in draft form in an attempt to engage and seek the views of US market participants. The draft legislation represents a bold move by the US as it aims to give market participants the confidence to transition large books of legacy LIBOR products to the recommended benchmark replacement without the fear of being sued by counterparties. Read more