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With fewer than 30 days until the cessation of LIBOR, another piece of the puzzle has fallen into place for U.S. dollar LIBOR transition. On 30 November 2021, Refinitiv, the ARRC-preferred publisher of spread-adjusted SOFR-based fallback rates, announced that its USD IBOR Institutional Cash Fallbacks (“Institutional Fallbacks”), launched on 11 August 2021 as prototype rates, are now available for use as production benchmarks.
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Continue Reading Refinitiv Spread-Adjusted Fallback Rates Become Production Benchmarks

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On 20 October 2021, in a Joint Statement on Managing the LIBOR Transition, the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau (“CFPB”), Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and State Bank and Credit Union Regulators (the “Regulators”) emphasized their expectations that supervised institutions will transition away from LIBOR in an orderly fashion by the end of 2021. Transition preparedness will be an increasing area of supervisory focus and review.
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Continue Reading Financial Regulators Clarify Key LIBOR Transition Considerations But Some Questions Remain

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On 29 September 2021 the UK Financial Conduct Authority (“FCA”) published Consultation Paper CP21-29: Proposed decisions on the use of LIBOR (Articles 23C and 21A BMR), in which it set out its plans for the temporary publication of ‘synthetic’ versions of LIBOR for a narrow range of outstanding sterling and yen contracts that cannot…

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 The UK Government passed the Financial Services Act 2021 (the “FS Act 2021”) on 29 April 2021, which amended the UK Benchmarks Regulation ((EU) 2016/1011) (the “UK BMR”), to provide the UK Financial Conduct Authority (the “FCA“) with new and enhanced powers to oversee the orderly wind-down of critical benchmarks. In particular, the legislation addresses the risk that LIBOR cessation poses to “tough legacy contracts” (i.e., contracts that genuinely have no or inadequate fallback rate alternatives and no realistic ability to be renegotiated or amended). The Critical Benchmarks (References and Administrators’ Liability) Bill (the “Bill”) has been drafted to address these risks.
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Continue Reading The Critical Benchmarks (References and Administrators’ Liability) Bill receives its first reading in the House of Lords

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

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

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

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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

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