Several remarks and releases by public officials and significant regulatory bodies in the first weeks of November garnered significant attention by financial institutions trying to discern next steps in the wind-down of USD LIBOR.
Continue Reading Signals or Noise in November for LIBOR Transition?
Legacy Instruments
UK Financial Services Bill: Amendments to the Benchmarks Regulation to support LIBOR transition
By LIBOR Transition Team on
On October 21, 2020, the UK Government introduced the Financial Services Bill (the Bill) to Parliament. The Bill is seen as a vital step towards ensuring the UK’s continued status as a global finance hub in the post-Brexit world, and it also introduces the UK Government’s legislative fix for LIBOR-referencing contracts that face insurmountable barriers in the transition from LIBOR (“tough legacy contracts”), as announced in June and discussed in our earlier update.
Continue Reading UK Financial Services Bill: Amendments to the Benchmarks Regulation to support LIBOR transition
ARRC Consultation on Spread Adjustment Methodologies
By Barlow T. Mann on
On January 21, 2020, the ARRC released a Consultation on spread adjustment methodologies for cash products referencing U.S. dollar (USD) LIBOR. The ARRC indicated that the spread adjustments are intended for use (i) in USD LIBOR contracts that have incorporated the ARRC’s recommended hardwired fallback language, or (ii) for legacy USD LIBOR contracts where a spread-adjusted SOFR can be selected as a fallback. The adjustments seek to establish a static spread adjustment that would be fixed at a specified time at or before LIBOR’s cessation and would adjust for the historical differences between LIBOR and SOFR and are intended to make the spread-adjusted rate comparable to LIBOR (the ARRC clarified that it is not considering dynamic spread adjustments). In addition to the methodology for determining spread adjustments, the ARRC is requesting comment on whether a “transition period” over which the applicable spread adjustment would be implemented should be included for any cash products in order to smooth the effects of a potentially abrupt transition to a new spread-adjusted rate, which may differ significantly from the rates prevailing at the time LIBOR is discontinued.
Continue Reading ARRC Consultation on Spread Adjustment Methodologies