Libor Risk – Quarterly report Q2 2020
Detaching an estimated $350 trillion of financial contracts from Libor was always going to be an uphill struggle. For a rump of so-called “tough legacy” contracts it’s a near impossible task. Now their future lies in the hands of legislators.
In a recent benchmark transition survey, six jurisdictions told the Financial Stability Board that legislation will be needed to shunt Libor’s most stubbornly welded contracts over to risk-free rates (RFRs). At least two – the US and, more recently, the UK – have already started work drafting suitable language. Another two warn the necessary fixes cannot be guaranteed.
UK legislators face a balancing act in crafting a lifeline for tough legacy contracts without encouraging widespread complacency. And there’s little time to do it in. While Libor is not set to cease until after the end of 2021 at the earliest, the FCA is eyeing the end of 2020 for possible confirmation of the benchmark’s demise. It’s at this point the credit spread would be fixed for derivatives fallbacks.
Remember when participants were calling for transition delays in response to Covid-19 lockdowns? That all seems like a very long time ago.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
Shifting Libor fallback window jolts basis market
Fallback spreads widened more than 20% after UK regulator says Libor’s end could be announced this year
How Covid‑19 is impacting transition preparations
A forum of industry leaders, including the sponsors of this report, discusses key industry concerns around the transition away from Libor, including how the discontinuation deadline will be impacted by the Covid‑19 pandemic, the benefits and challenges…
Libor death notice could be served this year – FCA
Announcement may come soon after Isda’s fallback protocol takes effect in November
Conduct risks stalk banks in Libor transition
As replacement rate concerns become more pressing, firms fear Libor lawsuits and regulatory wrath
Key steps in the transition to SOFR
Phil Whitehurst, head of service development, rates, SwapClear at LCH, offers his insight into when a term structure for the secured overnight financing rate (SOFR) is likely to be established, what will be required for this to become a reality and what…
Risk-free rates may fail liquidity test for hedge accounting
Experts fear trades referencing SOFR and €STR will not be eligible for hedging relief
Lagging futures market holding back swaptions RFR transition
“Elephant in the room” is hindering non-linear growth and swap market liquidity, say rates traders
Delivering certainty in uncertain times
TriOptima explains how it combines the reduction of gross notional exposure and the conversion of net risk exposure to deliver outsized results, partnering its portfolio compression network with core net ICE Libor over-the-counter swap portfolios
Sonia term rate nears ‘beta’ release, while SOFR struggles
ARRC chair says current liquidity in SOFR derivatives is insufficient to create a term rate
Bruised, not broken: execs say Libor switch on track despite Covid
Compressed timeline for transition may leave smaller firms struggling to meet end-2021 deadline
SOFR and credit spread – Not as simple as it seems
Chris Dias, principal and global Libor solution co-lead at KPMG, explores how the market will adjust as liquidity grows and why firms must resist the temptation to default to existing processes for determining credit spread and rethink the traditional…
Why Asian firms expect a major systems and data overhaul
In this feature, Bing Li, head of Asia‑Pacific, and Steffan Tsilimos, global head of interest rate derivatives products at Bloomberg, explore the implications of the Libor transition on the Asia markets and the broader market impact of the transition
First USD/CNY cross-currency swap using SOFR trades
Crédit Agricole and Bank of China’s $10m trade marks a new milestone for risk-free rate
LCH debuts central clearing for Sora derivatives
CCP expects surge in volumes after clearing first trade linked to Singapore’s risk-free rate
Singapore debuts floater linked to risk-free rate
DBS to issue one-year note with compounded SORA coupon
US benchmark switch splits swaptions market
Some users ignore new guidance to nominate SOFR for swap discounting
Twin-track solution for ‘tough legacy’ Libor falls flat
Critics deplore lack of detail in UK taskforce's call for parallel legal fix and synthetic rate
Structured products are lost in translation post-Libor
Benchmark shift would “fundamentally transform” popular rates structures, users fear
Libor trap lurks in 2021 US stress tests
Using SOFR, borrowing could boom and revenues collapse
Markit plans SOFR credit spread add-on using CDS data
Vendor taps vast pool of credit market data to create new benchmark “not dissimilar” to Libor
RFRs hit Main Street as Swiss banks launch Saron mortgages
Negative rates ease path for compounded Saron home loans without lags or lookbacks
Lloyds and Riverside rehitch revolving loan to Sonia
£100m Sonia facility overcame late operational hurdles to be among the first done since the onset of coronavirus