ISDA consults on fallback solutions for GBP and USD LIBOR ICE exchange rates

Current alternatives are not expected to work effectively with a permanent cessation of ICE LIBOR GBP and USD swap rates.

The ISDA (International Swaps and Derivatives Association) has launched a new consultation on the fallback arrangements for certain swap rates published by the ICE Benchmark Administration (IBA).

Following the UK FCA’s (Financial Conduct Authority) March 5 announcement on the future termination and / or loss of representativeness of LIBOR, IBA has indicated that it does not expect the input data to be necessary for the calculation of the GBP LIBOR ICE Swap Rate are available after December 31. 2021.

IBA therefore recently viewed on its intention to cease publication of the GBP LIBOR ICE Swap Rate for all tenors immediately after publication on December 31. IBA will issue a return statement after reviewing the responses to its consultation.

While IBA has yet to consult on the intention to cease publication of the USD LIBOR ICE swap rate, the FCA’s announcement should also have implications for this swap rate. IBA has indicated that it plans to initiate consultations on the potential termination of the USD LIBOR ICE exchange rate in due course.

In order to address the potential termination of these ICE swap rates, the new ISDA consultation is seeking feedback on the implementation of the fallback solutions for the ICE LIBOR GBP swap rate suggested in a document published by the UK Pound Sterling Risk Free Reference Rate Task Force Nonlinear Working Group.

ISDA is also a consultant on fallback solutions for the USD LIBOR ICE exchange rate offered in a separate paper published by a subcommittee of the ARRC (Alternative Reference Rates Committee) in the United States.

In either case, current fallbacks should not be able to work effectively during a permanent shutdown.

Consultation, available here, is open for comments until July 2, 2021.

ISDA will host a webinar and question-and-answer session for market participants on June 23, 2021 to discuss the consultation and explain how fallback solutions can be implemented in the ISDA documentation.

ISDA aims to publish the results of the consultation in July.

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