The majority of the London Interbank Offered Rates (LIBORs) – other than certain US Dollar LIBOR tenors that will continue through June of 2023 – are expected to permanently cease at the end of 2021.
In preparation for the LIBOR cessation and other related IBOR changes, the International Swaps and Derivatives Association (ISDA) and its counsel have worked with The Brattle Group to prepare a series of reports on IBOR benchmarks fallback rates. Two additional reports in this series have been recently published, one related to technical adjustments to fallback formulas for the Intercontinental Exchange (ICE) Swap Rates and the other related to market participant responses to an ISDA consultation about the proposed implementation of those suggested fallback formulas.
ISDA first published a May 2021 Brattle-prepared report: Review of Proposed Technical Adjustments to Fallback Formulas for the Intercontinental Exchange (“ICE”) Swap Rates. This report reviews the technical adjustments for the fallback formulas for ICE Swap Rates, the worldwide reference rate value for fixed interest rate swap rates for major currencies across tenors. ICE Swap Rates are linked to LIBORs in a non-linear manner and are not covered by ISDA’s Supplement 70 to the 2006 ISDA Definitions and the associated protocol. These technical adjustments were introduced in early 2021 through whitepapers released by the Working Group on Sterling Risk-Free Reference Rates in the UK, and the Alternative Reference Rates Committee in the US. Brattle’s report evaluated the technical adjustments that account for differences in day count convention and payment frequency between the ICE Swap Rates and the IBOR fallbacks.
Most recently, ISDA published the Brattle-prepared report Summary of Responses to the ISDA 2021 Consultation on Fallbacks for GBP LIBOR ICE Swap Rate and USD LIBOR ICE Swap Rate. This August 2021 report follows ISDA’s June 2021 market-wide consultation on implementing the suggested fallbacks for the GBP LIBOR ICE Swap Rate and the USD LIBOR ICE Swap Rate, which were introduced by the above whitepapers. The Consultation asked market participants from around the globe whether they agreed with the suggested fallback provisions, and sought additional input on implementing the suggested fallbacks. This report provides a summary of the responses to the Consultation.
To learn more about IBOR benchmark reform and the transition away from LIBOR, click here.