Interest rate benchmarks are widely relied upon in global financial markets by fund managers, investment banks and other important financial counterparties. They are referenced in contracts for derivatives, loans and securities. They are also used by market participants to value financial instruments, and by investment funds as benchmarks for assessing their performance. In response to the weaknesses identified in the setting of financial benchmarks such as the London Interbank Offered Rates (LIBOR), the global regulatory community has been involved in a program to strengthen financial benchmarks…


Australian managers and banks should have completed their transition programs. In the UK, in light of how the post-LIBOR landscape will not be one ruled by a single rate but an array of options, record keeping will be critical. The importance to regulators of trade economics has prompted a global requirement for market participants to report updated trade details, both when they trigger a fallback rate or make voluntary transfers to a RFR via bilateral contract amendments with their counterparty.

With the bulk of LIBOR settings in the derivatives market now phased out, the transition overall is considered to be going smoothly. The New York Fed estimated that about 80% or more of interdealer linear swaps risks were already linked to SOFR which is a big contrast to the slower moving loan markets (explainable in part, by lenders preferring benchmark rates that are more flexible around borrower-associated credit risks).

Going forward, market participants should keep watch for their exposure to potentially impacted IBORs and consider adhering to the ISDA Protocol module where they have not. For now, the focus for market players should be oversight, taking appropriate action in the face of exposures and ensuring their reporting obligations are met.

For more information, and any guidance or advice on LIBOR, Cleveland & Co External in-house counsel™, your specialist outsourced legal team, are here to help.

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