On Tuesday, the LSTA hosted 1,000-plus attendees at its 22nd Annual U.S. Loan Market Conference. Executive Director Bram Smith kicked off the day – and his last conference as LSTA Executive Director – exhorting members to be agents of positive change in the loan market.
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The multi-year process to prepare for any possible transition from LIBOR to a new loan reference rate has accelerated to a trot. First, on October 10, 2017, the Financial Stability Board (“FSB”) published its progress report on implementation. Second, in the U.S., the Alternative Reference Rates Committee (“ARRC”) established a business loans and CLO working group to help the syndicated loan market prepare for any transition from LIBOR to a new reference rate.
At ABS East this week, the LSTA (Meredith Coffey), SFIG (Sairah Burki), CREFC (Mike Flood) and NAIC (Eric Kolchinsky) got together to discuss regulation and the securitization markets, with a particular focus on what (and how) sensible FinReg reforms may materialize. We discuss the takeaways below.
The multi-year march toward a LIBOR fallback/replacement for derivatives (and possibly loans) has taken another step. On August 27, 2017, the Federal Reserve issued a “Request for Information Relating to Production of Rates”. Behind this unprepossessing title is a call for public feedback on what might become the LIBOR replacement for derivatives. (Any loan fallback would almost definitely require adjustments.) We discuss the background, the Fed’s request and possible LSTA action below.
As LIBOR continues to create headlines in a sleepy August market, we wanted to update LSTA members on a number of issues. First, we recap the current state of preparation for a possible LIBOR transition or disruption. Second, we discuss principles for IBOR fallbacks in the derivatives space. Third, in the loan space, we discuss potential stakeholders (and their needs), and, fourth, provide very early thoughts on how credit documentation could reduce any risk of a market disruption if LIBOR were permanently discontinued. Finally, for comparison purposes, we describe the ISDA fallback approach for IBORs.
Since the LIBOR speech by Andrew Bailey, Chief Executive of the FCA on July 27th, markets have been buzzing about whether LIBOR is ending, when it might end, and what loans and CLOs would do. On August 17th, the LSTA hosted a webcast walking through i) why LIBOR might end, ii) what the replacement might be, and iii) ways to approach loans and CLOs. We recap these issues below and encourage you to visit our LIBOR webcast page for slides and a replay.
Regulations and senior financial market professionals have been developing LIBOR fallbacks (in case LIBOR become unavailable) and a possible process to transition from LIBOR to a new reference rate. To get more insight open to see the presentation which is available to our Members.
As conversations around LIBOR alternatives continue, the FT reported on Wednesday that “the death of Libor may be exaggerated, particularly in US markets” despite the market buzz following last week’s speech by the Chief Executive of the U.K.’s Financial Conduct Authority (FCA). The FCA has announced it will no longer require banks to submit quotes for LIBOR rates in sterling by the end of 2021, but that does not mean that ICE could not continue to publish the dollar rate.
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