Buy side frets over fallbacks in ‘zombie Libor’ scenario
Firms say any future plunge in number of Libor contributors should trigger switch to fallback rate
Buy-side firms are increasingly worried about timing mismatches in fallbacks for cash and derivatives products in a “zombie Libor” situation, where only a handful of banks are submitting to the panel.
This trigger for switching from Libor to an alternative reference rate is absent from the list of four scenarios outlined in last year’s preliminary work by the International Swaps and Derivatives Association. Isda is developing the fallback language to be written into derivatives contracts ahead
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