Euromoney Learning Solutions

Libor in Crisis: Understanding Alternative Reference Rate Benchmarks

Available dates

Nov 25—27, 2019
3 days
London, United Kingdom
GBP 3395 ≈USD 4388
GBP 1131 per day

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About the course

Understand LIBOR and the challenges your organisation may face with it's termination

The use and quotation of LIBOR and other IBOR benchmark interest rates has been in crisis for the last several years. The financial world is rapidly transitioning away from LIBOR/IBOR benchmarks toward alternative reference rates (“ARR”) such as SOFR, SONIA, ESTER, and TONA. Industry participants are particularly concerned about an early termination of LIBOR and other quoted interest rates. This course is critical for those needing to understand the extraordinary upheaval that is occurring in financial markets over quoted interest rates. The participant will be able to decipher and understand the alphabet of interest rate benchmarks, regulators, cash market associations that are involved in the process.

Day 1 of the course will provide an overview and primer on this transition period, discussing the current status and use of LIBOR/IBOR benchmarks, how market participants will transition to new alternative reference rate benchmarks and deal with the potential early termination of LIBOR/IBOR benchmarks, and provide an overview of the development and use of the current risk free rates that are the keys to the process. Day 2 of the course provides an in depth discussion and understanding of the European Union Benchmark regulations and their role in the development and approval of new alternative reference rate benchmarks. The course will then focus on the development of the language and processes, including fallbacks, needed to transition to the use of new ARR benchmarks. The ISDA 2018 Benchmarks Supplement Protocol and changes to the fallback provisions in the 2006 ISDA definitions will be explored in detail. The recommendations of the Federal Reserve Alternative Reference Rate Committee (“ARRC”) and cash market associations will be analyzed with respect to the fallbacks and other contractual changes needed for loans and other cash products, including the Amendment Approach versus the Hardwired Approach.

Day 3 of the course focuses on the progress that regulators and financial markets have made to develop ARR benchmarks that comply with the European Union Benchmark Regulations. The progress made with respect to the development and implementation of risk free reference rates such as SOFR, SONIA, ESTER and TONA will be analyzed in details. The development of other unsecured, secured and term rates that comply with the benchmark regulations will also be explored.

What this Course Will Cover

  • The history, development and current issues with LIBOR
  • How LIBOR and IBOR benchmarks are calculated
  • The efforts of the Federal Reserve, the Financial Stability Board, IOSCO, ISDA and other regulators and market participants in reforming interest rate benchmarks.
  • Understanding fallbacks to LIBOR and IBOR in the event that these rates are no longer available
  • How the process of gathering and quoting benchmark interest rates are being strengthened
  • Analyzing and understanding the various new risk free rates that are being developed and implemented

What this Course Will Cover

  • The history, development and current issues with LIBOR
  • How LIBOR and IBOR benchmarks are calculated
  • The efforts of the Federal Reserve, the Financial Stability Board, IOSCO, ISDA and other regulators and market participants in reforming interest rate benchmarks.
  • Understanding fallbacks to LIBOR and IBOR in the event that these rates are no longer available
  • How the process of gathering and quoting benchmark interest rates are being strengthened
  • Analyzing and understanding the various new risk free rates that are being developed and implemented

Agenda

First Day – The Transition to Alternative Reference Rates

9:00-9:30 Introduction – Key Issues

  • Need to develop fallbacks (i.e. replacements) if LIBOR/IBORS are not quoted
  • Need to develop Alternative Reference Rates
  • Unsecured Rates
  • Secured Rates
  • Risk Free Rates
  • Key Transition Issues
  • Development of standards and protocols
  • Development of products referencing new Risk Free Rates
  • Transitioning Cross-currency basis market to new RFR benchmarks
  • Development of Risk Free Rate derived term rates
  • Conversion of legal contracts to new benchmarks
  • The Alphabet of Regulators
  • The Alphabet of Cash Market Associations

9:30-10:0 LIBOR & IBOR

  • Understanding LIBOR
  • The other rates
  • Determination of LIBOR & IBORs
  • Problems with LIBOR/IBOR
  • Market Manipulation & False Reporting
  • Post-Crisis Decline in Liquidity in Interbank Unsecured Funding Markets
  • Case Studies of LIBOR manipulation
  • Concern: The early discontinuation of LIBOR quotations.
  • Reform Efforts

11 – Noon EU Benchmark Regulation (BMR)

  • History
  • Requirements
  • Implementation

Noon – 1PM Lunch

1-2:00pm Derivatives and Fallbacks - Overview

  • Problem
  • ISDA Protocol
  • Mechanics
  • Implementation

2-3pm Lending and Fallbacks - Overview• ARRC, LMA and LSTA efforts

  • Bilateral Business Loans
  • Securitizations
  • Floating Rate Notes
  • Syndicated Business Loans

3:30-5:00 Alternative Reference Rates

  • Risk Free Rates
  • Risk Free Rate - Secured Overnight Financing Rate (SOFR)
  • Sterling Overnight Index Average (SONIA)
  • Euro Short-Term Rate (ESTER)
  • Tokyo Overnight Average rate (TONA)
  • Unsecured Rates
  • Secured Rates
  • Term Rates

Day 2 – Enhancing Contractual Robustness - EU Benchmark Regulation and Fallbacks

9 – 10 EU Benchmark Regulation (BMR)

  • History
  • IOSCO Principles
  • Requirements
  • Trigger or Termination of a Benchmark
  • Implementation

10-noon Derivatives and Fallbacks - the ISDA Protocol

  • Problem
  • ISDA Protocol
  • Derivative Fall Back Triggers
  • Spread Adjustments
  • Implementation

Case Studies

Noon – 1PM Lunch

1-2:30 Derivatives and Fall Backs Continued

2:30-5pm Cash Products and Fall Backs

  • LIBOR and Problems with Current Contractual Language
  • Role of ARRC
  • Input from Cash Market Associations
  • Amendments Approach versus Hardwired Approach
  • “Hedged” Loan Issues
  • ARRC Recommendations

  • Bilateral Business Loans

  • Securitizations

  • Floating Rate Notes

  • Syndicated Business Loans

Day 3 – Alternative Reference Rates

9-10 Strengthening Existing Rates

  • LIBOR
  • EURIBOR
  • TIBOR
  • Other Existing Rates (BBSW, DI Rate, CDOR, HIBOR, TIIE, SIBOR, JIBAR)

10:00 – 11 US Risk Free Rate - Secured Overnight Financing Rate (SOFR)

  • Development
  • Mechanics and calculation
  • Role and Use
  • Secured Overnight Financing Data -
  • Progress

11-Noon UK Risk Free Rate – Sterling Overnight Index Average (SONIA)

  • Bank of England
  • Development
  • Mechanics and Calculation
  • Role and Use
  • Development of forward-looking term reference rates

Noon – 1PM Lunch 1-2pm European Union Risk Free Rate - Euro Short-Term Rate (ESTER)

  • Key – needs to comply with BMR
  • Development
  • Mechanics and Calculation
  • Role and Use

2-3pm Japan Risk Free Rate - Tokyo Overnight Average rate (TONA)

  • Key – needs to comply with BMR
  • Development
  • Mechanics and Calculation
  • Role and Use

3-3:30 Risk Free Rates in Other Jurisdiction

  • Progress for Other Currencies (CHF, AUD, BRL, CAD, MXN, SGD and ZAR)
  • Concerns and Issues

3:30-4 Forward-looking Term Reference Rates

  • Importance of term rates
  • Progress with SOFR and SONIA
  • Key issues and concerns

4-5pm Other Alternative Reference Rates – Secured and Unsecured

Who should attend

This course is designed to cater for the needs of professions involved in loan, derivative and finance documentation involving LIBOR and other key benchmark interest rates:

  • Legal advisors and lawyers
  • In-house counsel
  • Corporate financiers
  • Credit officers
  • Fund managers
  • regulators

Trust the experts

Christian Johnson

Christian Johnson is the dean for Widener University Commonwealth Law School. Prior to joining Widener, Dean Johnson was the Hugh B. Brown Presidential Endowed Chair of the Law at the University of Utah College of Law. He is a frequent commentator and academic focusing primarily on global capital...

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