This page will be updated on a regular basis as relevant information becomes available globally and will serve as the central repository for information from ISDA relating to financial benchmark reform and the transition from LIBOR. If you have any questions or would like additional information in relation to these matters, please email: benchmarkreform@isda.org.
This page is separated in seven sections:
1. Background
2. Benchmark Fallbacks/Consultations
3. Bloomberg: Fallback Spread Vendor
4. Other Related ISDA Benchmark Initiatives
5. Relevant Research/Reading Material
6. Press Releases/Latest News/Speeches/Presentations
7. Market Education Calls/Webinars/Conferences
Key interbank offered rates (IBORs), types of interest rate benchmarks, are undergoing a period of change as regulators and industry groups have recommended that firms consider adoption of alternative, overnight risk-free rates (RFRs). In the case of LIBOR, the UK Financial Conduct Authority (FCA) has announced that it will not compel or persuade LIBOR panel banks to submit to LIBOR after the end of 2021, calling into question LIBOR’s existence after that date and accelerating efforts to adopt alternative RFRs and fully transition away from LIBOR before it may cease.
This section covers LIBOR in the five currencies in which it is currently published (US dollar, sterling, Swiss franc, Japanese yen and euro), EURIBOR, TIBOR, Euroyen TIBOR, BBSW, HIBOR and CDOR (each an IBOR) and their current administrators, as well as information about the alternative RFR for each IBOR, the administrators for the alternative RFRs, and the designated public-/private-sector working group for each relevant jurisdiction.
In 2019, the US CFTC Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee recommended ‘plain English’ disclosures for counterparties who continue to transact based on LIBOR and other key IBORs. These disclosures provide helpful background about the potential outcomes for these transactions and are available at CFTC “Plain English” Disclosures for New Derivatives Referencing LIBOR and other IBORs. ISDA maintains a database of supplemental information referenced in these disclosures that provides helpful information for all market participants regarding the IBORs, the alternative RFRs, the administrators for the alternative RFRs and the designated public-/private-sector working group for each relevant jurisdiction.
The UK FCA is the supervisor for the IBA, which is the administrator of LIBOR in all five currencies. It maintains information about the transition away form LIBOR on its website.
*NEW* HMT and FCA Statements (June 23)
- HMT June 23 Statement on Planned Amendments to Benchmark Regulation in the UK
- FCA June 23 Statement on Planned Amendments to Benchmarks Regulation in the UK
- FCA June 23 FAQs on Planned Amendments to Benchmarks Regulation in the UK
- ISDA derivatiViews: Tackling Tough Legacy
ISDA’s Work
ISDA identifies various key ISDA workstreams relating to the reform of IBORs and other interest rate benchmarks and the development of alternative RFRs in this table. ISDA expects to update this document on a quarterly basis.
ISDA conducts its work through a variety of different working groups (WGs): ISDA Americas and Europe Benchmark WG, ISDA APAC Benchmark WG, ISDA JPY Benchmark WG, ISDA EU Benchmark Regulation Advocacy Group and the ISDA IBOR Fallback Implementation Subgroup. To join one of the above WGs:
- Create an account on the ISDA website;
- After you create an account, click on the Committees tab and then view My ISDA Committee Dashboard. You can request to join and leave working groups and distribution lists
*CLICK HERE* NEW FACTSHEET: Understanding IBOR Benchmark Fallbacks
*CLICK HERE* Video Interview with ISDA CEO Scott O’Malia: What’s Next for Derivatives Markets?
To address the risk that one or more IBORs are discontinued while market participants continue to have exposure to that rate, counterparties are encouraged to agree to contractual fallback provisions that would provide for adjusted versions of the RFRs as replacement rates.
ISDA plans to amend certain ‘floating rate options’ in the 2006 ISDA Definitions to include fallbacks that would apply upon the permanent discontinuation of certain key IBORs and upon a ‘non-representative’ determination for LIBOR. ISDA is also amending certain floating rate options that use USD LIBOR as an input to include fallbacks that would apply if USD LIBOR is permanently discontinued. As it has done from time to time, ISDA will amend the 2006 ISDA Definitions by publishing a ‘Supplement’ (or ‘Supplements’) to the 2006 ISDA Definitions. Upon publication of the Supplement for the relevant IBOR, transactions incorporating the 2006 ISDA Definitions that are entered into on or after the date of the Supplement (i.e., the date that the 2006 ISDA Definitions are amended) will include the amended floating rate option (i.e., the floating rate option with the fallback). Transactions entered into prior to the date of the Supplement (so called “legacy derivative contracts”) will continue to be based on the 2006 ISDA Definitions as they existed before they were amended pursuant to the Supplement, and therefore will not include the amended floating rate option with the fallback.
ISDA also expects to publish a protocol (or protocols) to facilitate multilateral amendments to include the amended floating rate options, and therefore the fallbacks, in legacy derivative contracts. By adhering to the protocol, market participants would agree that their legacy derivative contracts with other adherents will include the amended floating rate option for the relevant IBOR and will therefore include the fallback. As always, any such protocol will be completely voluntary and will amend contracts only between two adhering parties (i.e., it will not amend contracts between an adhering party and a non-adhering party or between two non-adhering parties). The fallbacks included in legacy derivative contracts by adherence to the protocol will be exactly the same as the fallbacks included in new transactions that incorporate the 2006 ISDA Definitions.
| Target Timing for Fallback Implementation | |
|---|---|
| Bloomberg publication of monthly test data in Excel files | Roll outs on a currency-by-currency basis throughout May-July 2020 |
| Submission of final portion of Business Review Letter request to the US DoJ and outreach to other relevant competition authorities | July 2020 |
| Publication of Bloomberg indicative fallback rates | Mid-July 2020 (before publication of amendments to the 2006 ISDA Definitions and related protocol) |
| Publication of amendments to the 2006 ISDA Definitions and related protocol | Late July 2020 (or later date after receive positive Business Review Letter from the US DoJ and similar comfort from other relevant competition law authorities) |
| Effectiveness of amendments to the 2006 ISDA Definitions and related protocol | Late November 2020 (or 4 months after publication) |
Benchmark Fallback Consultations
Due to the fundamental differences in the nature of IBORs and the RFRs, key adjustments are necessary if fallbacks to RFRs are to take effect in contracts that were originally negotiated to reference the IBORs. ISDA ran public consultations to finalize the adjustment methodologies and subsequently issued a tender invitation for a vendor to perform and distribute these necessary adjustments.
At the request of the Financial Stability Board (FSB) Official Sector Steering Group (OSSG), ISDA also consulted on whether fallbacks for LIBOR should be triggered by a pre-cessation ‘non-representativeness’ determination by the UK FCA, as well as cessation.
These consultations ultimately yielded industry consensus, and more information about them can be found below. Please email questions regarding these consultations to FallbackConsult@isda.org.
2020 Pre-cessation Fallback Consultation
This consultation sought input on whether to add a pre-cessation trigger to the permanent cessation fallbacks that ISDA is implementing for LIBOR in its standard documentation.
- Results
- Consultation
- Webinar Recording: 2020 Consultation on How to Implement Pre-cessation Fallbacks in Derivatives (Slide presentation with annex)
- June 2020 Follow-up Letter to ISDA from the UK FCA
Supplemental Consultation on Spread and Term Adjustments, including Final Parameters thereof, for Fallbacks in Derivatives Referencing EUR LIBOR and EURIBOR, as well as other less widely used IBORs
This consultation sought input on the approach for addressing certain issues associated with adjustments that would apply to €STR if fallbacks in EURIBOR or EUR LIBOR take effect, including the final parameters for these adjustments. It also asks about adjustments that could apply if fallbacks take effect in less widely used IBORs.
- Results
- Consultation
- Workbook: Historical mean/median approach to the spread adjustment (Instructions for using workbook)
- Webinar Recording: ISDA Consultation on Fallbacks for Derivatives Referencing Euro LIBOR and EURIBOR
September 2019 Consultation on Final Parameters
This consultation sought input on the final parameters related for the adjustments that will apply to alternative RFRs if derivatives fallbacks are triggered.
- Results
- Consultation
- Workbook: Historical mean/median approach to the spread adjustment (Instructions for using workbook)
- Webinar Recording: ISDA Consultation on Final Parameters for Fallbacks
Supplemental Consultation on Spread and Term Adjustments for Fallbacks in Derivatives Referencing USD LIBOR, CDOR and HIBOR and Certain Aspects of Fallbacks for Derivatives Referencing SOR
This consultation sought input on the approach for addressing certain issues associated with adjustments that will apply to alternative RFRs if fallbacks take effect for USD LIBOR, CDOR or HIBOR. It also asks a question about fallbacks for SOR, which uses USD LIBOR as an input.
- Results
- Consultation
- May 2019 IBOR Fallback Consultations – FAQs (Updated June 26, 2019)
- Bloomberg Graphs: May 2019 Supplemental Fallback Consultation
- Market Education Call Recording: ISDA 2019 Fallback Consultations
- Webcast Recording: ISDA IBOR Derivative Fallbacks: May 2019 Consultations
Consultation on Pre-cessation Issues for LIBOR and Certain Other IBORs
This consultation related to pre-cessation issues and sought comments on how derivatives contracts should address a regulatory announcement that LIBOR is no longer representative of an underlying market.
- Results
- Consultation
- May 2019 IBOR Fallback Consultations – FAQs (Updated June 26, 2019)
- Market Education Call Recording: ISDA 2019 Fallback Consultations
- Webcast Recording: ISDA IBOR Derivative Fallbacks: May 2019 Consultations
2018 Benchmark Fallbacks Consultation
This consultation sought input on the approach for addressing certain technical issues associated with adjustments that will apply to alternative RFRs if the fallbacks are triggered. These adjustments are necessary because of the differences between the interbank offered rates and the RFRs.
- Results
- Consultation
- IBOR Fallbacks for 2006 ISDA Definitions – FAQs (Updated September 17, 2018)
- Bloomberg Graphs: 2018 Benchmark Fallbacks Consultation
In July 2019, ISDA announced that Bloomberg Index Services Limited (BISL) was selected to calculate and publish adjustments related to fallbacks that ISDA intends to implement for certain interest rate benchmarks in its 2006 ISDA Definitions.
- ISDA/Bloomberg/Linklaters IBOR Fallbacks Factsheet
- Bloomberg Webinar: LIBOR Transition Series / ISDA Fallback Rates
- Bloomberg IBOR Fallback Worked Example
- Bloomberg Test Data for IBOR Fallbacks
- Bloomberg Rulebook for IBOR Fallback Methodology
- IBOR Fallback Rate Adjustments FAQs – Updated July 2, 2020
Information about other ISDA benchmark reform initiatives is available below:
Swaptions
In anticipation of expected changes in the discount rates used by clearing houses of euro and US dollar, ISDA published Supplement 64 to the 2006 ISDA Definitions on March 30, 2020 to allow parties to specify a discount rate in swaption confirmations for which ‘Cleared Physical Settlement’ or ‘Collateralized Cash Price Cash Settlement Method’ is applicable. At the same time, ISDA updated the ISDA Collateral Cash Price Matrix to align the discount rates specified with expected changes in the discount rates.
- ISDA Guidance Note: Swaptions: ‘Agreed Discount Rate’ Supplement to the 2006 ISDA Definitions Published
- Supplement 64 to the 2006 ISDA Definitions
- Collateral Cash Price Matrix
- Market Education Call Recording: Swaptions: ‘Agreed Discount Rate’ Supplement to the 2006 ISDA Definitions
EONIA & €STR
On October 1, 2019, EONIA’s administrator, the European Money Market Institute (EMMI), changed EONIA’s methodology to become €STR + 8.5 basis points. €STR is the Euro Short Term Rate published by the European Central Bank. EMMI also announced that it will cease publication of EONIA after January 3, 2022. Consequently, the Working Group on Euro Risk-Free Rates recommended that market participants pro-actively transition to €STR ahead of EONIA’s cessation and that a fallback to €STR + 8.5 basis points be embedded in contracts that continue to reference EONIA ahead of its cessation.
In response, ISDA published a number of documents:
- Supplement 59 and Supplement 60 to the 2006 ISDA Definitions provide a new Floating Rate Option (EuroSTR) for €STR and an amended version of the EONIA Floating Rate Options so that they have fallbacks based on the EU Risk Free Rate Working Group’s recommendation.
- A new set of definitions, the ISDA Collateral Agreement Interest Rate Definitions, provide stand-alone definitions of EONIA and €STR for use in collateral agreements with fallbacks which mirror those in the relevant Floating Rate Options. New versions of this definitional booklet will be published over the coming months which will add definitions of other risk free rates, such as SOFR.
- A Bilateral Template EONIA Amendment Agreement, which parties can use to amend legacy transactions or existing collateral agreements so that they reference €STR instead of EONIA and/or embed the same fallbacks as provided for in the EONIA and EuroSTR Floating Rate Options and Collateral Agreement Interest Rate Definitions.
EU Benchmarks Regulation and Review
Article 28(2) of the EU Benchmarks Regulation requires supervised users of benchmarks to reflect in their client contractual terms the steps they plan to take if certain contingencies occur in relation to a benchmark (such as its cessation). ISDA published the ISDA 2018 Benchmarks Supplement to provide generic fallbacks for use in relation to benchmarks that do not have their own specific fallbacks. For example, the ISDA IBOR fallbacks described above would apply in precedence to those set out in the Benchmarks Supplement in relation to permanent cessation or any pre-cessation trigger. The ISDA 2018 Benchmarks Supplement is jurisdiction agnostic and so may also be of interest to those looking to improve the robustness of their benchmark-referencing derivatives, for example, in response to IOSCO’s Statement on Matters to Consider in Use of Financial Benchmarks.
- ISDA 2018 Benchmarks Supplement
- ISDA 2018 Benchmarks Supplement FAQs
- ISDA 2018 Benchmarks Supplement Protocol
- ISDA Benchmarks Supplement Protocol FAQs
On October 11, 2019, the European Commission launched a public consultation on the EU Benchmarks Regulation Review, which included (among other things) questions regarding critical benchmarks, like the IBORs, and third country benchmarks. ISDA submitted a response to the BMR Review on December 31, 2019.
Additional information from external sources regarding certain non-ISDA initiatives is available below:
CCP PAI/Discounting Changes:
- CME:
- SOFR & €STR Discounting Transition Process for Cleared Swaps
- Three-Part Webinar Series
• Introduction & Overview
• Operational Processes & Testing
• SOFR Auction Process
- LCH:
- Eurex:
Interest Rate Benchmarks Review
- Interest Rate Benchmarks Review: First Quarter of 2020
- Interest Rate Benchmarks Review: Full Year 2019 and the Fourth Quarter of 2019
- Interest Rate Benchmarks Review: Third Quarter of 2019 and Year-to-September 30, 2019
- Interest Rate Benchmarks Review: Second Quarter of 2019 and First Half of 2019
- Interest Rate Benchmarks Review: First Quarter of 2019
- Interest Rate Benchmarks Review: Full Year 2018 and the Fourth Quarter of 2018
- Interest Rate Benchmarks Review: Third Quarter of 2018 and Nine Months Ended September 30, 2018
| derivatiViews | |
|---|---|
| Date | Title |
| June 26, 2020 | Tackling Tough Legacy |
| May 28, 2020 | From 2006 to 2020 |
| March 18, 2020 | Pre-cessation Consultation: Responding to COVID-19 |
| February 5, 2020 | Another Look at Pre-cessation |
| January 24, 2020 | New Letters on Pre-cessation Issues Welcome |
| December 19, 2020 | 2020 Looming Large |
| June 10, 2019 | Benchmarks and Accounting |
| May 29, 2019 | Another Step to Benchmark Fallbacks |
| July 4, 2018 | The Steps to Benchmark Reform |
| March 12, 2018 | Get Engaged on Benchmark Reform |
| February 5, 2018 | The $370 Trillion Benchmark Challenge |
| December 13, 2017 | Now is the Time to Think About Benchmarks |
| IQ: ISDA Quarterly | |
| Issue | Title |
| May 2020 | Seismic Shift |
| August 2019 | The Road Ahead |
| August 2018 | Benchmark Transformation |
| April 2018 | An Eye to the Future |
| Speeches | |
|---|---|
| Date | Title |
| February 12, 2020 | ISDA CEO Scott O’Malia Opening Remarks at ISDA/SIFMA AMG Benchmark Strategies Forum |
| September 19, 2019 | ISDA CEO Scott O’Malia Opening Remarks at ISDA Europe Conference, London |
| May 29, 2019 | The Industry Road Map |
| January 16, 2019 | ISDA CEO Scott O’Malia Guest Remarks at Exchequer Club Luncheon in Washington, DC |
| September 26, 2018 | ISDA CEO Scott O’Malia Opening Remarks at ISDA Europe Conference, London |
| May 15, 2018 | Overview of Benchmark Reform Initiatives |
| Presentations | |
|---|---|
| Date | Title |
| May 2020 | Benchmarks Update – Key 2020 Milestones and ISDA Deliverables for Derivatives |
| April 2020 | ISDA Benchmark Reform |
| Upcoming Events | ||
|---|---|---|
| Date | Title of Event | Region |
| July 14, 2020 | The Path Forward for LIBOR Transition | Online |