LMA and ACT publish second edition of joint guide on "The future of LIBOR: What you need to know"18 September 2018
The Loan Market Association ("LMA") and the Association of Corporate Treasurers ("ACT") have updated their joint guide on LIBOR benchmark reform entitled "The future of LIBOR: What you need to know". The Guide is intended to provide an overview of developments and key issues with respect to the proposed transition away from LIBOR benchmarks to near risk-free rates ("RFRs"). In particular, it covers:
- background to LIBOR reforms
- the alternatives being proposed
- key issues for financial markets
- LIBOR and the LMA documents
- national working groups and how to get involved
The Guide has been updated to reflect developments since the first edition was published in March 2018. There have been a number of important developments in that time, including publication of the LMA's revised replacement of screen rate clause, the launch of a consultation on term rates in the sterling market, the selection of the euro RFR and publication of the ISDA consultation on IBOR fallbacks. The Guide has also been expanded to include a focus on each of the RFRs chosen in the UK, US, EU, Switzerland and Japan.
We hope that this Guide provides a useful resource for our members and have made it available in both pdf and powerpoint format should members wish to use the materials for presentation purposes.
Commenting on the second edition of the Guide, Clare Dawson, Chief Executive of the LMA, said:
"We are very pleased to launch the second edition of this Guide, which was originally produced following requests from members of the LMA and ACT who wanted a clear reference guide explaining the background to LIBOR reforms, what the various alternatives to LIBOR are and the issues that arise."
"The process of transition remains an enormous task and there have been a number of important developments since we published the first edition which market participants need to be aware of. The regulators have continued to emphasise that the disappearance of LIBOR should not be seen as a remote probability and it is something which firms must be prepared for. The importance of understanding and engaging with the key issues cannot therefore be overstated, particularly given the speed of current developments. We hope that the Guide provides a useful basis to help market participants get involved with finding suitable alternatives. Given LIBOR's origination in the syndicated loan market, finding a suitable alternative should LIBOR cease to exist is of the utmost importance to this market."
Commenting on the second edition of the Guide, Caroline Stockmann, Chief Executive of the ACT, said:
"A key role of the ACT is to inform members of developments in the financial markets that impact their business, and LIBOR transition is one of the biggest challenges to be faced by corporates looking to fund their business or hedge their interest rate exposures. The transition away from LIBOR will happen, and every organisation who uses LIBOR in any capacity needs to keep up to date with developments. We are therefore particularly pleased to present the second edition of this Guide in close collaboration with the LMA."
"Recent developments and increasing liquidity in RFR markets are signalling that it is now the time for corporates to engage; we would encourage you to read and absorb this Guide and start conversations with your counterparties to understand both their plans and how the transition will affect your business."