As we patiently wait for the International Swaps and Derivatives Association (ISDA) to publish its long planned IBOR Fallback Protocol and IBOR Fallback Supplement for interest rate derivatives, we thought we would highlight some recent announcements on the topic.<\/p>\n
According to ISDA\u2019s letter on July 22, 2020<\/a> to the Alternative Reference Rates Committee (ARRC), ISDA planned to finalize the Protocol and the Supplement by the end of July.\u00a0 On July 29, 2020<\/a>, ISDA announced that it would publish the Protocol \u201csoon\u201d.\u00a0 This is hardly the first time that things have been delayed, but it\u2019s important to get it right.\u00a0 Among other things, it\u2019s possible that ISDA is still waiting for a positive business review letter from the US Department of Justice and similar feedback from competition authorities in other jurisdictions.<\/p>\n <\/p>\n Even though the actual language has not been published yet, the concept behind the Protocol has been supported by the ARRC.\u00a0 In its Recommended Best Practices<\/a>, the ARRC suggested that market participants adhere to the Protocol within the 4-month period after it is published and before the amendments to embed the fallbacks in legacy transactions take effect. By adhering to the Protocol, market participants agree that their legacy derivatives contracts with other adherents will include the amended floating rate option for the relevant IBOR and will therefore include the fallback.<\/p>\n On August 10, 2020<\/a>, Tom Wipf, Chair of the ARRC, reinforced the recommendation by sending a letter to the full ARRC membership urging them to sign onto the Protocol and the Supplement.\u00a0 In his letter, he noted that before the official launch of the Protocol, many institutions can sign up to adhere to the Protocol \u201cin escrow\u201d so that they will be included among the list of adherents announced at the time of the Protocol\u2019s official launch.<\/p>\n In the meantime, there are plenty of available resources on the topic. A summary of ARRC recommended fallback language for syndicated business loans can be reviewed in our prior alert<\/a>. Besides recent ARRC guidance, ISDA published a brochure<\/a> that provides answers for key questions for market participants including how to reduce exposure to LIBOR (or another IBOR), steps to take if market participants find themselves exposed to LIBOR (or another IBOR) at the time of discontinuation, and an explanation for a \u201cpre-cessation\u201d fallback for LIBOR. Market participants may also review a two-page factsheet<\/a> published by ISDA to gain an understanding of IBOR benchmark fallbacks.<\/p>\n Stay tuned for updates on the Protocol!<\/p>\n Duane Morris\u2019 LIBOR Transition Team:\u00a0\u00a0Roger S. Chari<\/a>, Chair, Joel N. Ephross<\/a>,\u00a0Amelia (Amy) H. Huskins<\/a>,\u00a0Phuong (Michelle) Ngo<\/a>, and\u00a0Han Wang<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" As we patiently wait for the International Swaps and Derivatives Association (ISDA) to publish its long planned IBOR Fallback Protocol and IBOR Fallback Supplement for interest rate derivatives, we thought we would highlight some recent announcements on the topic. According to ISDA\u2019s letter on July 22, 2020 to the Alternative Reference Rates Committee (ARRC), ISDA … <\/p>\n