Tough legacy: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Add quote - source - ACT blog - https://www.treasurers.org/hub/blog/status-update-libor-transition?_cldee=ZG91Z0Bkb3Vnd2lsbGlhbXNvbi5jb20%3D&recipientid=contact-61e01a18fd04e61180d1000d3ab15408-b5d2ee07c94f46e682d3d363e416efa6&utm_source=ClickDimensions&u)
(Update for cessation of LIBOR.)
 
Line 1: Line 1:
''Interest rates - reference rates - LIBOR transition.''
''Interest rates - reference rates - LIBOR transition.''


In this context 'legacy' contracts are existing contracts (1) referencing LIBOR (2) that do not include fallback provisions that cater satisfactorily - or at all - for the continuation of the contract upon LIBOR being permanently discontinued.
In the context of LIBOR transition, 'legacy' contracts were contracts (1) referencing LIBOR (2) that did not include fallback provisions that catered satisfactorily - or at all - for the continuation of the contract upon LIBOR being permanently discontinued.


'Tough legacy' contracts are once that both (1) contain inadequate fallbacks and (2) are impossible or very difficult to amend in advance of the end 2021 deadline for the cessation of LIBOR.
'Tough legacy' contracts were ones that both (1) contained inadequate fallbacks and (2) were impossible or very difficult to amend in advance of the deadline for the cessation of LIBOR.




:<span style="color:#4B0082">'''''Tough legacy contract examples'''''</span>
LIBOR ended in September 2024.
 
:*Certain bonds (because the use of consent solicitations to transition legacy LIBOR bonds is costly, time-consuming and may require the consent of all of the bondholders).
:*Certain bilateral and syndicated loans (due to the diverse nature of borrowers, questions of cost and resource availability and other challenges).
:*Certain derivatives (particularly where these are used to hedge an exposure which is itself considered tough legacy or forms part of a more complex structure).
 
:''A practical guide to LIBOR transition - Slaughter and May - September 2020, p11''
 
 
:<span style="color:#4B0082">'''''Transactions that cannot be transitioned'''''</span>
 
:"arguably the last major outstanding issue [in GBP LIBOR transition] is related to tough legacy and the practicalities surrounding those transactions that cannot be transitioned.  
 
:The FCA has published a number of consultations exploring how they might manage the provision of a synthetic LIBOR for use in tough legacy contracts and there is legislation working its way through Parliament to provide legal certainty.
 
:However, this is all happening quite late in the day and so amendments may have to happen at the last minute on these contracts - perhaps another reason to get everything else sorted now.
 
:One comment that we are hearing repeatedly is a reminder from the regulators that whilst a synthetic LIBOR might solve the immediate problem, there is no guarantee how long such a rate would be published – and therefore, synthetic LIBOR should only be viewed as a temporary (bridging) solution."
 
:''Status Update – LIBOR transition - Sarah Boyce - Association of Corporate Treasurers - 07 September 2021''




Line 44: Line 25:
*[[Synthetic LIBOR]]
*[[Synthetic LIBOR]]
*[[Transition]]
*[[Transition]]
==Other resource==
*[https://www.bankofengland.co.uk/news/2024/october/the-end-of-libor The end of LIBOR - Press release - Bank of England - 1 October 2024]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]
[[Category:Identify_and_assess_risks]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Manage_risks]]
[[Category:Risk_reporting]]
[[Category:Risk_frameworks]]
[[Category:The_business_context]]
[[Category:The_business_context]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]
[[Category:Identify_and_assess_risks]]
[[Category:Investment]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Long_term_funding]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Risk_reporting]]
[[Category:Risk_frameworks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:The_business_context]]
[[Category:Financial_products_and_markets]]

Latest revision as of 07:18, 4 October 2024

Interest rates - reference rates - LIBOR transition.

In the context of LIBOR transition, 'legacy' contracts were contracts (1) referencing LIBOR (2) that did not include fallback provisions that catered satisfactorily - or at all - for the continuation of the contract upon LIBOR being permanently discontinued.

'Tough legacy' contracts were ones that both (1) contained inadequate fallbacks and (2) were impossible or very difficult to amend in advance of the deadline for the cessation of LIBOR.


LIBOR ended in September 2024.


See also


Other resource

Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Tough_legacy&oldid=57000’