Further Consultation on Pre-Cessation Fallbacks Announced

The International Swaps and Derivatives Association has announced that it will be issuing later in February 2020 a further consultation on how to implement pre-cessation fallbacks. A “pre-cessation” trigger in derivative contracts would cause LIBOR-based contracts to fall back to an alternative reference rate in the event that the U.K. Financial Conduct Authority deemed LIBOR no longer to be representative. ISDA has decided to re-consult following the FCA's clarification on the length of the period during which such a non-representative LIBOR might be published prior to its total cessation. ISDA notes that while the majority of respondents to its first consultation supported the move, there were differing views on how it should be implemented. ISDA will propose an amendment to the 2006 ISDA Definitions to introduce fallbacks that would apply to all covered derivatives in the event of the permanent cessation of an IBOR or a non-representative pre-cessation event, whichever occurs first. A single protocol would also be released to allow participants to include both pre-cessation and permanent cessation fallbacks in their legacy derivatives trades.

View ISDA's announcement.

View details of ISDA's first consultation on pre-cessation fallbacks.

View details of the FCA's clarification of publication of non-representative LIBOR.

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