Summary
The relevant dates regarding cessation are the same in the November request for comment – i.e., all LIBOR settings will either cease to be provided by any administrator or no longer be representative:
immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and,
immediately after 30 June 2023, in the case of the remaining US dollar settings.
Impact:
Maybe the biggest impact of this statement is the fact that this will constitute an Index Cessation Event under swaps and Benchmark Transition Event under credit agreements using the ARRC suggested language (or variation thereof). This
Tuesday, March 9, 2021
On March 5, 2021, in a series of highly coordinated cross-border announcements, regulators on both sides of the Atlantic announced the future cessation of various London Interbank Offered Rates (
LIBOR) rates. These announcements were further augmented by statements issued by various industry groups such as LSTA and ISDA as well as the LIBOR administrator.
The bottom line is that for USD LIBOR, the one-day, one-month, six-month and one-year LIBOR rates will cease publication in June 2023. Meanwhile, the one- and two-week USD LIBOR rates will cease publication as of Dec. 31, 2021, although a synthetic rate may be available for legacy contracts after this date. Notwithstanding the June 2023 date, the U.S. banking regulators have previously advised that new financial contracts may not utilize LIBOR after Dec. 31, 2021.
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Following years of consultations, ISDA published its long-awaited IBOR Fallbacks Supplement to the 2006 ISDA Definitions (the Supplement) and Protocol on October 23, 2020. The Supplement and Protocol provide a standardized and efficient means of transitioning derivatives contracts currently referencing IBORs to risk-free rates (more information on which can be found in our earlier blog post).
Market participants are reminded that the Supplement and Protocol will become effective on January 25, 2021 (the Protocol Effective Date). At present over 4,800 parties have adhered to the Protocol.
How do the Protocol and Supplement work?
New trades: The Supplement amends the 2006 ISDA Definitions by, among other things, including fallbacks to the risk-free rates in the relevant IBOR definitions. The new fallbacks will apply to all new trades entered into on or after the Protocol Effective Date which reference the 2006 ISDA Defini
(a) with respect to the Series 42 Covered Bonds, (i) the LIBOR vs SONIA Interpolated Basis; (ii) the Forward Start Adjustment; and (iii) the New Margin, in each case in respect of the Series 42 Covered Bonds; and (b) with respect to the Series 66 Covered Bonds, (i) the LIBOR vs SONIA Interpolated Basis; (ii) the Forward Start Adjustment; and (iii) the New Margin, in each case in respect of the Series 66 Covered Bonds. Shortly thereafter the Issuer will arrange execution and delivery of (i) the Amended and Restated Final Terms; (ii) the Amended and Restated Term Advance Notice; (iii) the Supplemental Trust Deed; and (iv) the Supplemental Agency Agreement, in each case in respect of each Series, and each of which will be made available on the website of the Issuer at https://www.santander.co.uk/about-santander/investor-relations/santander-uk-covered-bonds