LIBOR Transition Resources
LIBOR Transition Overview
Interest Rate Benchmarks have been Changed
It had been recommended that the US Dollar (USD) London Interbank Offered Rate (LIBOR) be replaced by the Secured Overnight Financing Rate (SOFR) as a primary benchmark index. LIBOR is used as an index to calculate interest rates in over $200 trillion of financings.
- However, SOFR is a recommended, not required, new benchmark with banks permitted to select their own new benchmarks.
- Objective SOFR spreads are only recommended, not required, with banks permitted to select their own new interest rates at their sole discretion.
- The impending transition is expected to disrupt worldwide financial markets. This is expected to pose significant challenges and risks to financial institutions and their borrower clients.
- This will impact any and all financial institutions and borrowers that have outstanding interest rate swaps and/or loans tied to LIBOR. It is likely that many of these companies are unaware of the proposed transition. Executing what these companies may be provided by their financial institutions, as ‘standard forms,’ will have significant financial and legal ramifications for years to come.
- Financial institutions have been "fast-tracking" this documentation. Once this documentation is in place, it will be very difficult to change or revoke absent protracted litigation/arbitration.
- While the effective date was previously set for December 31, 2021, it was announced that the transition period has been extended through June 2023, presumably due to both the lack of readiness and the complexity of the transition process.
- It is imperative that clients who will be impacted begin to plan and prepare now, especially since financial institutions and US regulators seem intent that the transition begin immediately.
- As a result of this immediate implementation, all need to prepare including, but not limited to:
- Large and small banks
- Large and small companies
- Insurance companies
- Real estate entities
- Colleges and universities
- Museums and performing arts centers
- Other nonprofits and foundations
- Government issuers and government-sponsored enterprises (GSEs)
- Mutual, pension, private equity, and hedge funds
- Consumer groups
The End of LIBOR: The Twilight Zone™ Edition, March 11, 2021
For private plaintiffs, all eyes on possible UBS deal, The National Law Journal, December 14, 2012
LIBOR Crosses the Pond, Banking New York, October 1, 2012
LIBOR Related Webinars
Managing and Preparing for LIBOR Transition: Practical Guide
Partner Les Jacobowitz previously spoke with The Knowledge Group (TKG), offering a practical guide for companies and executives that will be impacted. Firms of all sizes should now start preparing for the transition’s impact to effectively guard their interests and address potential risk issues. Importantly, no new LIBOR-based instruments should be entered into though that has not been industry practice. It is of paramount importance that companies and their counsel keep up with the updates and developments in order to effectively protect their businesses and prevent risk issues including, but not limited to, significant financial repercussions in the transition and inevitable litigation.
Watch TKG February 2020 Presentation
LIBOR Transition: Demystifying Trends, Developments, and Legal Issues Webinar
The concurrent LIBOR transition activities continue to be a major issue for global financial institutions and borrower clients. Recently, the Alternative Reference Rates Committee (ARRC) released (i) a consultation seeking comments intended as part of its fallback provision recommendations for cash products referencing LIBOR and (ii) an RFP for calculating the fallback spread. This, along with the other trends and developments that are anticipated to arise, continues to cloud the current legal climate. With the impending risks and pressures from regulatory agencies, financial entities and borrowers need to develop well-established preparation and compliance plans that will help them in this changing landscape.
Watch TKG September 2020 Presentation
NYIC LIBOR Transition Webinar
As we approach the end of 2021, NYIC has assembled a panel to discuss important updates and market developments in connection with the end of LIBOR and the transition to new “risk-free rates” and “credit-sensitive rates”. The panelists will also discuss developments on SOFR, including Term SOFR, credit spread adjustments, and the impact of statements from financial regulators regarding no new LIBOR exposure after 2021.
'Zombie' LIBOR for USD Contracts: Navigating the Critical Issues
The scheduled phase-out of the LIBOR by the end of 2021 is currently posing significant transition challenges for banks and all concerned borrowers. Furthermore, ICE Benchmark Administration Limited (IBA) announced last December 2020 the extension of U.S. dollar (USD) LIBOR through June 2023, creating a change in the LIBOR transition process and opening more ambiguities in managing USD contracts. With these and other critical issues incessantly emerging in the backdrop, it is necessary for financial institutions to keep themselves abreast of the latest developments and develop a strategic plan to ensure that risks and pitfalls are well-mitigated. In this webinar, “‘Zombie’ LIBOR for USD Contracts: Navigating the Critical Issues”, Les Jacobowitz and Paul Noring (Berkeley Research Group) provided the audience with an in-depth analysis of the critical issues surrounding LIBOR. Speakers also offered the best practices that are essentially needed in this evolving area of law.
Credit Research Foundation – How Will LIBOR Changes Impact Your Risk Approach
Discussed during this webinar are the following critical topics: transition rationale, financial impact, critical dates, transition documentation concerns, case studies, and associated risks.
Navigating the LIBOR Transition Path 2022 and Beyond
The London Interbank Offered Rate, most popularly known as LIBOR, is one of the most important interest reference rates in the world. However, for several years, LIBOR has been hounded by many challenges and controversies. As a result, the U.K. Financial Conduct Authority (FCA) announced that LIBOR will permanently cease immediately after December 31, 2021 for all currencies except (i) most U.S. Dollar facilities, (ii) the British Pound and (iii) the Japanese Yen. The FCA announced that (i) USD LIBOR is to terminate on June 30, 2023, (ii) Yen LIBOR is expected to terminate in 2022 and (iii) Pound LIBOR’s end date has not yet been determined. As part of the transition, benchmarks are transitioning to alternative risk-free rates (RFRs), or alternative commercial proprietary benchmarks which regulators have warned may have similar flaws to LIBOR. The move away from LIBOR has been creating a drastic impact on all financial and non-financial institutions and a myriad of financial instruments on derivative and cash markets. Although banks have been making progress in their transition with respect to some financial products, all must still be wary of potential challenges and drawbacks in the ongoing transition process and the post-LIBOR era.
Watch TKG September 2022 Webinar
LIBOR Transition Issues in 2023
In future webinars and alerts, Les and the Derivatives Team are expected to address the following:
- Borrower Financial Implications
- Tax Ramifications
- Transition Documentation Concerns
- Trust Indenture Concerns for Bonds and Securitizations
LIBOR Client Alerts and Related Materials
USD LIBOR Class Action
- Initial Objection Letter
- Barclays Hearing Transcript
- Citibank Objection
Unlikely Provocateur Emerges to Challenge Libor Class Settlements, Reuters, January 10, 2018
Where's the Damages? Proposed LIBOR Class Settlements Leave One Objector Wondering, New York Law Journal, January 12, 2018
- Citibank Hearing Transcript
Buchwald Signals Defeat for Objections in LIBOR Class Suits, New York Law Journal, January 23, 2018
- Final Objection Submission (Complete Filing)
Business Compliance/Corporate Citizenship
Managing Third-Party Risk: Recent FCPA Action Reflects Government’s Continued Focus on Intermediaries, June 30, 2021
JPMorgan Chase DPA Provides Insight into Government’s Assessment of Compliance Programs, October 1, 2020
DOJ Updates Corporate Compliance Guidance, Continues Focus on Risk, Reporting, and Training, June 4, 2020
- CFTC’s Historic Enforcement Action Impacting the Oil Industry & Related Derivatives, August 11, 2022
- Deutsche Bank DPA Reflects Government’s Focus on Third-Party Risk Management and Data-Driven Compliance Programs, January 20, 2021
- Investment Bank To Pay Over $130 Million To Resolve Foreign Corrupt Practices Act and Fraud Allegations, January 15, 2021
- CFTC’s First Enforcement Action Against an Exchange (NYMEX) for CEA Violations, November 10, 2020
Emergency Monetary/Fiscal Measures
Repo Market Disruptions: In Reverse (Part II), June 22, 2021
Repo Market Disruptions: In Reverse, June 1, 2021
The End of LIBOR: Crucial Liquidity Measures by the Federal Reserve System, March 13, 2020
The End of LIBOR: Further Market Liquidity Issues in Light of Market Turmoil, March 10, 2020
The End of LIBOR: SOFR Updates, December 27, 2019
Federal Law/New York Law
- As Halloween Approaches, ‘Zombie’ LIBOR Is (Once Again) Scheduled to Appear, October 18, 2022
- Federal Law to the Rescue? (The Senate Version), April 14, 2022
- The End of LIBOR: The Twilight Zone™ Edition, March 11, 2021
International Protocols/UK Laws
The End of LIBOR: New Year’s Resolutions, January 10, 2023
As Halloween Approaches, 'Zombie' LIBOR Is Scheduled to Appear, October 4, 2021
LIBOR Transition Comparison: UK vs. US (Round II), July 12, 2021
LIBOR Transition Comparison: US vs. UK (Focusing on Interdealer Brokers), June 14, 2021
Financial Services Bill Introduced Into UK Parliament, October 22, 2020
LIBOR Transition Implications
The End of LIBOR: Final Countdown, February 28, 2023
USD LIBOR Transition: Has the Moving Van Arrived Yet?, December 1, 2021
Interest Rate Benchmarks Are Changing: Why Health Care Boards Should Care, The Governance Institute, September 27, 2021
LIBOR Transition: Potential Higher Interest Rates and Resultant Job Cuts, July 1, 2021
Municipal VRDO Class Action Survives Banks’ Request for Dismissal, The Banking Law Journal, March, 2021
Recent Swap Manipulation Cases, February 23, 2021
Recommended Benchmarks or Credit-Sensitive Indices: The Best Path Forward?, July 19, 2021
The End of LIBOR: SOFR and Related Updates, February 19, 2020
The End of LIBOR: SOFR Updates, February 10, 2020
The End of LIBOR: SOFR Volatility and LIBOR Transition Update, November 7, 2019
Swap Transactions: What Is an IRMA? When Are IRMAs Necessary?, January 11, 2023
- ISDA 2020 IBOR Fallbacks Protocol, October 26, 2020
Swaps 101 and the Death of LIBOR, June 25, 2020
- The Long and Winding Road: The End of LIBOR, March 8, 2023
- Buckle Your Seatbelts: Tax Ramifications of the LIBOR Transition, July 27, 2021
- The End of LIBOR: Proposed Treasury Regulations and Unaddressed Issues, November 1, 2019
Federal Law to the Rescue?, November 3, 2021
The Effect of LIBOR Cessation on Bonds – What’s a Trustee to do?, May 12, 2021
US Securities Laws
Does the SEC "Best Interest" Regulation Go Far Enough?, August 1, 2022
Intriguing FINRA Enforcement Action In the Bond Market: More to Come?, September 22, 2021
LIBOR Transition: (Bet You Didn't Know) Municipal Advisors’ and Underwriters’ Duties, July 22, 2021
Overlooked Issues for LIBOR Transition: Board Governance and Disclosure Requirements, July 14, 2021