Trade body consults on US, UK Libor proposals
From Global Investor Group:
Trade body the International Swaps and Derivatives Association has launched a consultation on the introduction of standards determining how some swaps contracts will switch to another benchmark when the Libor rates they currently use are suspended.
The New York-based trade body launched on Friday a consultation on how to implement fallbacks for certain swap rates published by ICE Benchmark Administration (IBA), the Libor administrator run by Intercontinental Exchange.
ISDA said in a statement IBA is consulting on its plan to cease publication of the sterling Libor ICE Swap Rate on December 31 2021 which will likely have implications for the subsequent suspension of US dollar Libor ICE Swap Rate on June 30 2023.
The consultation specifically wants feedback on US dollar Libor ICE swap rate plans proposed by the US Subcommittee of the Alternative Reference Rates Committee in March and proposals for sterling Libor fallbacks detailed by the UK’s Non-Linear Task Force of the Working Group on Sterling Risk-Free Reference Rates in February.
The trade association said the new consultation is open until July 2 and this deadline will not be extended. Clément Miglietti, chief product manager, at financial technology firm NeoXam, said the ISDA consultation is timely: “The consequential reputational damage banks have faced post-Libor means that this consultation comes at a welcome time. Right now, banks are trying to work out how they will capture, store and validate all market and credit spread information that connects Libor and SONIA contracts.”
Gary Gensler, the new chair of US equities regulator the Securities and Exchange Commission, criticised on Friday the Bloomberg Short-Term Bank Yield (BSBY) Index, arguing the benchmark has some of the “same flaws as Libor”. The Financial Stability Board published in early June documents outlining its expectations over the timing of the planned transition away from the Libor benchmark and stressed that interest rate derivatives should reference overnight rather than term rates.