Non-representative: Difference between revisions
imported>Doug Williamson (Add link.) |
(Update for LIBOR transition progress.) |
||
| (One intermediate revision by the same user not shown) | |||
| Line 9: | Line 9: | ||
using it in many contexts by the EU and UK regulatory framework that governs the use of important benchmarks. | using it in many contexts by the EU and UK regulatory framework that governs the use of important benchmarks. | ||
For all practical purposes, this means that if a | For all practical purposes, this means that if a rate becomes non-representative, the consequences are no different to had it ceased. | ||
''(Source - The LMA’S recommended forms of facility agreement for loans referencing risk-free rates - A Borrower’s Guide - Slaughter & May - ACT - May 2021 - p11)'' | ''(Source - The LMA’S recommended forms of facility agreement for loans referencing risk-free rates - A Borrower’s Guide - Slaughter & May - ACT - May 2021 - p11)'' | ||
| Line 19: | Line 19: | ||
* [[Benchmarks Regulation]] | * [[Benchmarks Regulation]] | ||
* [[Fallback]] | * [[Fallback]] | ||
* [[Financial Conduct Authority]] | * [[Financial Conduct Authority]] (FCA) | ||
* [[Provision]] | * [[Provision]] | ||
* [[Rate switch]] | * [[Rate switch]] | ||
| Line 31: | Line 31: | ||
== | ==Other resource== | ||
*[https://www.treasurers.org/hub/technical/libor/borrowers_guide_to_loans_referencing_risk_free_rates Borrower’s Guide to the LMA’s recommended forms of facility agreement for loans referencing risk-free rates (RFRs)] | *[https://www.treasurers.org/hub/technical/libor/borrowers_guide_to_loans_referencing_risk_free_rates Borrower’s Guide to the LMA’s recommended forms of facility agreement for loans referencing risk-free rates (RFRs)] | ||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
[[Category: | [[Category:Financial_products_and_markets]] | ||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Investment]] | [[Category:Investment]] | ||
[[Category:Long_term_funding]] | [[Category:Long_term_funding]] | ||
[[Category:Manage_risks]] | [[Category:Manage_risks]] | ||
[[Category:Risk_reporting]] | |||
[[Category:Risk_frameworks]] | [[Category:Risk_frameworks]] | ||
[[Category: | [[Category:The_business_context]] | ||
Latest revision as of 18:41, 11 March 2024
Interest rates - reference rates - LIBOR transition.
A rate losing representativeness means it is considered by the regulator to have ceased being representative of the underlying market or economic reality it is supposed to represent, and that representativeness will not be restored.
A rate becoming non-representative in this way may be a trigger for the application of fallback rate provisions, rate switch provisions, or clauses providing for the re-negotiation of the agreement in question to replace the relevant rate, all of which may appear in LIBOR-referencing loans.
If a rate such as LIBOR loses representativeness, regulated financial institutions will be prevented from
using it in many contexts by the EU and UK regulatory framework that governs the use of important benchmarks.
For all practical purposes, this means that if a rate becomes non-representative, the consequences are no different to had it ceased.
(Source - The LMA’S recommended forms of facility agreement for loans referencing risk-free rates - A Borrower’s Guide - Slaughter & May - ACT - May 2021 - p11)
See also
- Base rate
- Benchmark
- Benchmarks Regulation
- Fallback
- Financial Conduct Authority (FCA)
- Provision
- Rate switch
- Reference rate
- Risk-free rates
- SOFR
- SONIA
- Synthetic LIBOR
- Transition risk
- Waterfall
