Credit adjustment spread methods for active transition of GBP LIBOR-referencing loans
The Working Group published a paper designed to support loan market participants in considering credit adjustment spreads for active transition, which describes the key methodologies emerging in the loan market and how these compare to the approaches taken in the bond and derivatives markets.
Path for discontinuation of new sterling LIBOR-linked lending by end-Q1 2021
A key priority for the Working Group is the recommended milestone set out in its roadmap to cease issuance of sterling LIBOR-based loan products maturing beyond end-2021 by the end of Q1 2021. The Working Group has published an indicative path to discontinuation of sterling LIBOR-linked lending, intended to act as a guide for lenders, borrowers and infrastructure providers in determining intermediate steps within their firms to meet the end-Q1 2021 timeline.
Open letter to loan system vendors and treasury management system providers
The Chair of the Working Group wrote an open letter to loan system vendors and treasury management system providers, asking them to support their clients and the market in their transition away from LIBOR. System providers are asked to ensure that their software is able to accommodate the Working Group’s loan market convention recommendations ahead of end-Q1 2021.
Supporting transition in sterling non-linear derivatives
The Working Group published a paper providing considerations on how a non-linear derivatives market could be structured using compounded in arrears SONIA. The paper covers a range of products, and is intended to support all users of non-linear derivatives to meet the Working Group’s target milestone for market participants to cease initiation of new sterling LIBOR-linked non-linear derivatives expiring after 2021 by end Q2/Q3 2021 (except for risk management of existing positions).
The paper expands on the February 2020 results of a survey of 15 dealers in sterling non-linear derivatives conducted by the Working Group to understand the preferred approach of market participants.
Summaries of freely available independent RFR calculators and Beta Term SONIA Reference Rates
The Working Group published:
These papers aim to keep market participants and vendors informed if they choose to adopt SONIA compounding methods or transition to TSRRs (where such transition is appropriate). In particular, they aim to help them to consider if they need to make any amendments to their systems or products.
Working Group welcomes announcement by ISDA on its IBOR Fallbacks Protocol and IBOR Fallbacks Supplement
The Working Group, the FCA and the Bank of England welcomed the announcement by ISDA that its IBOR Fallbacks Protocol and IBOR Fallbacks Supplement will be launched on Friday 23 October 2020, with an effective date of Monday 25 January 2021.
The Working Group strongly encourages widespread and early adherence to the protocol by affected financial and non-financial firms, as appropriate.