Shearman & Sterling LLP | Financial Regulatory Developments Focus | International Swaps and Derivatives Association Consults on Fall Backs Based on Overnight Risk-Free Rates for Certain Derivatives
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  • International Swaps and Derivatives Association Consults on Fall Backs Based on Overnight Risk-Free Rates for Certain Derivatives
    07/12/2018

    The International Swaps and Derivatives Association has launched a consultation in which it proposes to amend its standard documentation to implement fall-backs based on alternative risk-free rates for certain key Interbank Offered Rates - GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW. ISDA states that the back-ups will apply if the relevant IBOR is permanently discontinued, based on defined triggers.

    ISDA is seeking feedback on the approach to address certain technical issues arising from the necessary adjustments that will apply to the RFRs if the fall backs are triggered.

    ISDA intends to consult on the technical issues for these changes for derivatives referencing USD LIBOR, EUR LIBOR and EURIBOR at a later date. It requests preliminary feedback on the technical issues associated with fall-backs for these benchmarks in this consultation.

    Responses to the consultation should be submitted by October 12, 2018. ISDA will determine which approach to adopt based on the feedback and will publish the final approach for review and comment before implementing any changes to the ISDA standard documentation.

    The FSB issued a statement on the same day welcoming ISDA's consultation and encouraging market participants to respond to the proposals.

    View ISDA's consultation.

    View details of the FSB's statement

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