On 19 August 2021, the Hong Kong Monetary Authority (“HKMA”) issued Circular B1/15C to all authorised institutions (“AIs”) with the following updates on recent developments on the reform of interest rate benchmarks.

Continue Reading HKMA Circular on Term SOFR, new USD LIBOR-linked contracts after 2021, and stepping up surveillance of AI readiness

The version of the proposed federal Adjustable Interest Rate (LIBOR) Act of 2021 that was introduced in the House of Representative in 2020 mirrored, with a handful of notable exceptions, both the substance and the text of the analogous New York State legislation that became law on 6 April 2021 (the New York statute is included as a new article 18-C of the General Obligations Law).  However, the text of the proposed federal statute that the House Committee on Financial Services ordered reported to full House on 28 July of this year differs markedly from the New York statute.

Continue Reading A Closer Look at the Adjustable Interest Rate (LIBOR) Act of 2021

On 29 July 2021, the Alternative Reference Rates Committee formally recommended the forward-looking SOFR term rates published by CME Group. As reported in our earlier blog post, Almost Time for Term SOFR, the rate is recommended for use in business loans, as well as the related hedges and securitizations (notably for CLOs).

Continue Reading It’s Here! The ARRC Formally Recommends CME Group’s SOFR Term Rate

On 21 July 2021, the U.S. Alternative Reference Rates Committee (“ARRC”) announced the publication of conventions and use cases for employing Term SOFR, as produced by CME Group, in transitioning loan products away from LIBOR. Although the ARRC has not yet recommended the use of Term SOFR, it published these new resources in anticipation of announcing shortly a formal recommendation for the use of Term SOFR “across financial markets.”

While generally helpful to support a smooth transition, the ARRC noted that Term SOFR will be especially helpful in the business loans market, particularly multi-lender facilities, middle market loans, and trade finance facilities, as well as in limited cases of hedges and securitizations tied to term rates.


Continue Reading Almost Time for Term SOFR

In April 2021, Alabama followed New York’s lead and passed the LIBOR Discontinuance and Replacement Act of 2021, a bill aimed at addressing LIBOR cessation with respect to USD LIBOR contracts governed by Alabama law that include either insufficient, or no, LIBOR fallbacks.

Continue Reading Alabama Passes LIBOR Bill Substantively Identical to New York Bill

On 8 July 2021, Hong Kong Monetary Authority (HKMA) issued a circular to all authorised institutions (AIs) requesting them to give a further push to promote the corporate sector’s awareness of LIBOR transition.

HKMA requested each AI to (i) distribute a leaflet (enclosed with the circular) by 31 July 2021 to all of its corporate customers that have outstanding LIBOR-linked contracts with the AI; and (ii) send an email confirmation to HKMA after completing that exercise.


Continue Reading HKMA directs all AIs to distribute LIBOR leaflet to corporate customers by 31 July 2021

On July 6, 2021, the Financial Stability Board released its latest Progress Report to the G20 on LIBOR Transition Issues. The report finds that, given the extent of risks associated with a failure to prepare adequately for the transition, the onus of action is on market participants. The FSB believes that the tools necessary to complete the transition are currently available, and have been for some time. Over the past several years, market participants have established mechanisms to use compounded risk-free rates (RFRs) not only in derivative markets, where use of RFRs was already common, but also in the cash markets. Firms now have certainty about the cessation timeline, and the fixing of spread adjustments by the International Swaps and Derivatives Association (ISDA) creates a clear economic link between LIBOR and selected RFRs, providing clarity for market participants to engage in discussions about active transition of LIBOR referencing contracts that expire after end-2021.

Continue Reading Financial Stability Board Releases Latest Progress Report on LIBOR Transition, Urging Action to Complete Transition by Year-End and Calling Out the Loan Markets

By now most, if not all, financial market participants know that the recommended alternative for the London InterBank Offered Rate (“LIBOR”) for U.S. Dollars is the Secured Overnight Funding Rate (“SOFR”). Many also are aware that, in addition to SOFR, five additional benchmark rates and/or spread adjustments have been proposed to replace LIBOR. These alternative benchmarks generally capture the cost of unsecured bank borrowing, which is the cost that LIBOR also reflects and which is a rate that is more relevant to the way many banks fund themselves than SOFR, which is a secured overnight rate based on transactions in U.S. Treasury securities.

Continue Reading Eeny, Meeny, Miny, Muse; Which LIBOR Alternative Shall I Choose?

Testimony at a virtual hearing on Thursday, April 15, 2021, of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets of the US House Committee on Financial Services reinforced regulatory support for federal legislation to facilitate the transition from LIBOR.

Continue Reading Recent Congressional Hearing Indicates that Federal LIBOR Transition Assistance Law Increasingly Likely

On 31 March 2021 the Singapore Steering Committee for SOR and SIBOR Transition to SORA (“SC-STS”) published a report providing guidance on new industry timelines to cease issuance of SOR derivatives and SIBOR-linked financial products.  On the same day SC-STS and the Association of Banks in Singapore issued a joint press release (the “Press Release”) relating to the publication of the SC-STS report.

Continue Reading Singapore Reiterates the Need for Active Transition to SORA