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LIBOR developments tracker

LIBOR developments tracker Scope of the tracker This tracker sets out developments related to the transition away from LIBOR to risk-free rates starting from 2018. It provides updates in relation to each of the LIBOR currencies and contains separate sections for regulatory updates and for cross-currency updates. The euro section also contains information on the transition from EONIA to €STR. The final section of the tracker sets out anticipated next steps in relation to LIBOR transition. For more information on the background to the transition away from LIBOR and other IBORs towards using RFRs, as well as information on the specific issues for the loan market, derivatives market, and debt capital markets of the adoption of RFRs, see Practice Note: LIBOR transition. For information on basing a facility agreement on risk-free rates instead of LIBOR, see Practice Note: Interest provisions in risk-free rate based loan agreements. This tracker does not cover updates in relation to the EU Benchmarks Regulation. For information on this, see: Benchmarks Regulation—timeline [Archived]. For a detailed...

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Interest provisions in risk-free rate based loan agreements

Interest provisions in risk-free rate based loan agreements What does this Practice Note cover? This Practice Note aims to assist practitioners with understanding interest provisions in Loan Market Association (LMA) recommended form facilities agreements. This Practice Note: • explains in brief what is meant by interest rate provisions in the context of a loan agreement • provides an overview of the transition away from LIBOR • explains the LMA’s approach in its documentation • provides guidance on amending a loan agreement to be based on a risk-free rate • explains what is meant by switch mechanisms and provides explanatory guidance on the switch mechanism in the LMA standard form facilities agreements • discusses the key features of loan agreements based on compounded RFRs, and • sets out a key points checklist for drafting a compounded RFR-based facility agreement For: • information about using term RFRs in a loan agreement, see Practice Note: Term risk free rates in loan agreements • an introductory guide to interest in a...

Switzerland—cross border banking and finance guide

Switzerland—cross border banking and finance guide Loan market and developments Please provide a brief overview of the current state of the loan markets in your jurisdiction and any significant recent market developments According to statistical data which the Swiss National Bank published for November 2019, banks licensed in Switzerland provided credit facilities amounting to some CHF 1,214,000 million (amounts utilised) and CHF 1,507,000 million (amounts committed), respectively, to borrowers incorporated or resident in Switzerland. Some CHF 1,035,000 million were utilised mortgage loans. Commercial loan amounts have increased slowly but constantly over the last few years. This trend is likely to continue, in particular, for loans granted to individuals and small- and mid-cap corporate borrowers. In particular, the Swiss market for syndicated lending transactions significantly increased during the last 20 years. Commitment amounts in the high three-digit millions were not uncommon during the peak years before 2008. The financial crisis, the strict capital base requirements of Basel III and the strong Swiss Franc somewhat slowed down the...

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When drafting a multicurrency facilities agreement, should I use the recommended conventions for Sterling loans for loans in other currencies?

When drafting a multicurrency facilities agreement, should I use the recommended conventions for Sterling loans for loans in other currencies? The Working Group for Sterling RFRs (£RFRWG) issued comprehensive recommendations as to how to calculate and use SONIA in loan agreements, known as conventions. The LMA RFR based facilities agreements include schedules setting out sample drafting for loans in USD, Sterling, CHF and Euro, reflecting these conventions. However, the Sterling conventions do diverge in some areas from the conventions recommended by working groups for other currencies. This Q&A looks at two key areas where the working groups’ recommendations diverge, reference rate floors, and whether to use the observation shift or lag methodology. Where can I find the conventions for USD, CHF and Euro? See ARRC Syndicated Loan Conventions EURIBOR fallbacks and Swiss National Bank—National Working Group for Risk-Free Rates. Are there any key points to note about the recommended conventions? The recommendations by the working groups have been developed within differing contexts. The conventions for...

What will happen to loan agreements that can’t be amended by the end of the year?

What will happen to loan agreements that can’t be amended by the end of the year? LIBOR is ceasing at the end of 2021 for most currencies and tenors. The exceptions are: • one, three, six and 12 month US dollar LIBOR, which is continuing to be published until end-June 2023, though use in new contracts is being prohibited or discouraged by regulators, and • certain Sterling and Yen LIBOR tenors (one, three and six month) which will be published as ‘synthetic LIBOR’ The regulators are encouraging the market to amend contracts wherever possible to provide certainty and avoid a last-minute panic, but some contracts are likely to be impossible to amend, or, because of the volume of contracts, simply not amended in time. The UK, EU and US have all come up with legislative ‘fixes’ to try to (temporarily at least) solve this problem. There are still areas that need to be finalized, though the position is clearer than it was. What will happen will depend on the ...

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Banking and Finance weekly highlights—7 July 2022

This week's edition of Banking and Finance weekly highlights includes: (1) Banking & Finance—June 2022 case round-up, (2) FCA consults on winding down ‘synthetic’ sterling LIBOR and US dollar LIBOR, and (3) The Procurement Bill—selection, exclusion, conflict of interests and debarment.

ISDA responds to CFTC NPR on clearing of swaps referencing RFRs

The International Swaps and Derivatives Association (ISDA) has responded to the Commodity Futures Trading Commission’s (CFTC) notice of proposed rulemaking (NPR) on clearing of swaps referencing risk-free rates (RFRs). The response highlighted the following points: the effective date for newly included clearing requirements (CRs) should in no event be sooner than three months after publication of the final rule; the effective date for the removal of US dollar LIBOR swaps from the CRs should be earlier than the date when any clearing house converts any US dollar LIBOR swap; consider excluding SARON swaps from the CRs or, in the alternative, their effective date should be aligned to the ultimate effective date of any related Swiss CRs; transactions stemming from post-trade risk reduction exercises should be exempt from the clearing obligation.