Dear Mr Lueder,
I am writing to you on behalf of the Euro Risk Free Rates Working Group (“RFRWG”) with regards to discussions on the potential designation of statutory replacement rates for GBP LIBOR and JPY LIBOR.
An agreed action in the WG meeting held on 1 July 2021 was to convene a task force to consider solutions for GBP and JPY LIBOR contracts referencing the 1, 3, and 6 months tenors of the mentioned rates for which active transition or updating contractual language to include robust fallbacks will not be possible by the end of 2021 (“tough legacy”). UK authorities have announced that they will mandate IBA to continue publishing GBP LIBOR and JPY LIBOR beyond the end of 2021 under a revised (synthetic) methodology, but have stated that the rates will no longer be representative of their underlying interest, and have limited publication to one year, with an annual review for synthetic GBP LIBOR for up to ten years. As a result, market participants and clients would face uncertainty on the future performance of their contracts. This may lead to confusion, the need for parties to implement divergent operational solutions, and legal uncertainty.
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