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Clifford Chance

Clifford Chance

IBORs and benchmark reform

Exploring the impact of transitioning from LIBOR and other IBORS

The transition from LIBOR and other IBORs could be the most significant change to financial markets in recent years.

Against a backdrop of regulatory encouragement, participants in the financial markets have been planning and working towards transition away from LIBOR towards alternative risk free rates.

Our experts can help you to understand what this will mean for your transactions and prepare for the future.

Transition from LIBOR to an Alternative Benchmark Rate Raises Concerns Particular to REMICs

On October 8, 2019, the U.S. Department of Treasury proposed regulations that would address the tax issues for Real Estate Mortgage Investment Conduits that could arise from the impending transition away from interbank offered rates as reference rates for floating rate debt. As discussed in this briefing, the Proposed Regulations include some important conditions that – if adopted as proposed – will require close oversight to confirm that they are met.

Given the severity of the potential ramifications of not meeting these requirements, it is critical that all participants of a REMIC deal are aware of, and seek legal advice regarding, the tax aspects of switching to a replacement benchmark rate. Read more about the Transiton from LIBOR to an Alternative Benchmark Rate and the concerns raised in particular to REMIC's.

Sterling LIBOR transition – 2020 Roadmap

The UK regulators, in a series of co-ordinated publications, have stepped up their warnings to market participants to move away from the use of sterling LIBOR. Although there has already been much progress in the markets, this is a clear sign that momentum is expected to increase during the course of 2020 in order for market participants to be ready for the cessation of LIBOR in 2021.

In this note, we explore these publications and their implications. Read more about Sterling LIBOR transition - 2020 Roadmap

LIBOR - Loan Market Update

With just over two years to go until the FCA no longer compels banks to submit quotes for LIBOR, regulatory pressure towards transition away from LIBOR continues. Compared with other financial markets in which issuances in risk-free rates (RFRs) are moving towards becoming the norm, there have been relatively few transactions based on RFRs in the loan markets. The recent issuance of LMA exposure draft documentation may be the catalyst for movement towards resolution of the outstanding questions and further movement towards the use of RFRs. 

In this note, we consider the LMA documentation and some of the other issues relating to transition in the loan market. Read more about LIBOR - Loan Market Update.

Rate Expectations: Transitioning away from LIBOR - practical guidance for corporate treasurers

It has been over 18 months since Andrew Bailey, Chief Executive of the UK’s Financial Conduct Authority (FCA), announced the need for the market to transition away from LIBOR before the end of 2021. As we get ever closer to that December 2021 end date, this briefing explores the current state of LIBOR transition, what a move to risk-free rates will mean in practice for corporate treasurers, and some key steps that treasurers might take in the near term to ready themselves for LIBOR’s potential demise. Read more about Rate Expectations: Transitioning away from LIBOR - practical guidance for corporate treasurers.

OIS and RFR Futures Conventions: Lessons for LIBOR replacement term rates

The development of term benchmarks based on risk-free rates (RFRs) is an important aspect of the work to facilitate a successful transition from LIBOR, particularly for corporate lending and other cash products. This briefing considers how conventions used in Overnight Index Swaps (OIS) and RFR futures markets are relevant to the development of RFR-based term rates. Read more about OIS and RFR Futures Conventions: Lessons for LIBOR replacement term rates.

LIBOR - a brief history

From the outset of its creation, the syndicated loan market worked on the principle that pricing would be based on the interest rate at which interbank deposits were offered by banks to other prime banks. LIBOR will cease to be published by the end of 2021 at the latest. How did we get to this point and what are the alternatives? Read more about LIBOR - a brief history.

Transitioning from LIBORs and IBORs - an international overview

Before financial markets can be encouraged to move from using LIBOR or other IBORs as reference rates in new financial contracts, there must be suitable alternatives in place. This briefing provides a snapshot of “risk-free reference rates” (RFRs) selected by different markets to replace LIBORs and IBORs for different currencies. Read more about Transitioning from LIBORs and IBORs.

LIBOR - Cross Product Review

The market is looking for an appropriate replacement for LIBOR that this works across all transactions. This briefing reviews the comparative product challenges for the loan, bond (including securitisation) and derivatives markets. Read more about LIBOR - Cross Product Review.

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