the authoritative voice of the EMEA market

LIBOR

On 27 July 2017, Andrew Bailey, Chief Executive of the UK Financial Conduct Authority, made a speech about the future of LIBOR stating that market participants should not rely on LIBOR being available after 2021. It is by no means certain that LIBOR will cease to be published post-2021, however, the LMA is working with the market, other trade associations and the regulators on contingencies should that prove to be the case at some future date.

What's New?

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This video interview with Neil McLeod, Head of Group Treasury Markets Trading at Erste Group Bank AG, considers the ISDA consultation on IBOR fallbacks published in July 2018.

Selection of ESTER as the new euro risk-free rate

On 13 September 2018, the working group on euro risk-free rates recommended the euro short-term rate (ESTER) as the risk-free rate for the euro. ESTER will replace EONIA, which no longer meets the criteria of the EU Benchmarks Regulation ("BMR") and so will see its use restricted as of 1 January 2020. ESTER will also provide a basis for developing fallbacks for contracts referencing EURIBOR, as the compliance of its new hybrid methodology with the BMR will be assessed in 2019 (with no guarantee of a favourable outcome).

Consultations on LIBOR transition – industry responses required

Two important consultations on LIBOR transition were launched in July 2018: (i) the Bank of England is seeking comments on the proposed creation of term SONIA reference rates; and (ii) ISDA is seeking input on approaches to addressing technical issues with adjustments to apply to fallbacks to risk free rates. Whilst the LMA will look to respond to the consultations, we encourage all market participants to submit responses directly to ensure the views of the loan market are represented.

Click here to view the BoE consultation (closes 30 September). Click here to view ISDA's consultation (closes 12 October).

LMA and ACT paper on syndicated loans and forward-looking term rates

This joint publication by the LMA and ACT considers the use of forward-looking term rates in the syndicated loan market. In particular, it covers the key features of syndicated loans impacted by the transition from LIBOR to overnight risk-free rates, along with the implications for both borrowers and lenders of the transition. Click the arrow to access this article.

Joint trade association letter to the Financial Stability Board outlining key issues for the global financial markets of a transition away from LIBOR to risk free rates

On 31 January 2018, the LMA, in conjunction with the ACT, AFME, APLMA, ICMA, ICMSA, JSLA, LSTA and SIFMA, wrote a letter addressed to the Financial Stability Board which outlines the key issues arising across the different financial markets and currencies of a transition away from LIBOR to near risk free rates.

Developments in respect of LIBOR and the move to risk-free rates (LMA News H2 2018)

In the last LMA newsletter (H1 2018), the article ‘The potential discontinuation of LIBOR and the impact on the syndicated loan market’ considered the future of LIBOR, potential alternatives and issues for the loan market. This article provides an update on developments in respect of each of the LIBOR currencies and the LMA’s continued work on LIBOR transition.

LMA publishes revised Replacement of Screen Rate clause to provide further flexibility in light of uncertainty over the future of LIBOR

The LMA has published an updated version (the "Revised Replacement of Screen Rate Clause") of the optional "Replacement of Screen Rate" clause that has been included in the Primary Documents and the Leveraged documents since November 2014. The Revised Replacement of Screen Rate Clause was developed in order to facilitate further flexibility than the existing clause allows in light of uncertainty over the future of LIBOR and other benchmark rates.

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Webinar: Developments on the future of LIBOR and the impact on the syndicated loan market

This on-demand webinar is a recording of the Early Evening Seminar held on 24 May 2018 in London; the seminar was delivered by speakers from the LMA, ACT, FCA, HSBC, Allen & Overy and Lloyds Banking Group.