Co-hosts

Lead Sponsor

Endorser1

Mark AustenCEO
ASIFMA2

Co-hosts

Lead Sponsor

Endorser3

Agenda:Time (ICT)

Session10:00-10:10am

Welcome Remarks• Mark Austen, CEO, ASIFMA• Kobsak Duangdee, Secretary General, The Thai Bankers’ Association• Ariya Tiranaprakij, Executive Vice President, Thai Bond Market Association

10:10-10:30am

Keynote Address• Dr. Vachira Arromdee, Assistant Governor, Financial Markets Group, Bank of Thailand

10:30-10:35am

ASIFMA Regional Update• Philippe Dirckx, Managing Director – Head of Fixed Income, ASIFMA

10:35-10:50am

Impact of LIBOR Transition on Thai Banking Industry and Key Considerations for a
Smooth Transition• Sinsiri Thangsombat, Assurance Leader, PwC Thailand

10:50-11:30am

Product Presentations on Derivatives, Bonds and Loans• Jing Gu, Head of Legal, Asia Pacific, ISDA
• Mushtaq Kapasi, Managing Director – Chief Representative Asia Pacific, ICMA
• Fergus Evans, Partner, Clifford Chance
4Agenda:Time (ICT)

Session

11:30am-11:40am

Data and Infrastructure Preparedness: Practical Challenges of IBOR Transition• Weng Khong Wong, Market Specialist - Fixed Income & Fixed Income
Derivatives, Bloomberg LP

11:40am-12:20pm

Banking Panel on Implementation/Conduct Issues• Varong Vongsinudom, First Vice President, Products Solutions and Market
Innovation, KrungThai Bank
• Prapairat Wotticharoenvong, Senior Vice President, Market Risk Management
Division, Siam Commercial Bank
• Tiak-Peow Phua, Executive Director, Libor Transition, Conduct, Financial Crime andCompliance, Standard Chartered• Ryan Page, Proposition Specialist, Refinitiv (moderator)

12:20-12:30pm

Presentation on Local Implementation Use Case
• Mongkol Poonlapmongkol, Customer Success Manager – Indochina, Refinitiv Thailand

12:30-12:35pm

Closing Remarks• Prut Sukcharoennukul, Account Director, Refinitiv Thailand

12:35-12:45pm

Q&A
5

Co-hosts

Lead Sponsor

Endorser6

Get involved by:

Asking a question anytime via the “Q&A” box on your tool bar

7

Co-hosts

Lead Sponsor

Endorser8

Welcome Remarks:

Kobsak Duangdee
Secretary General
The Thai Bankers’ Association9

Co-hosts

Lead Sponsor

Endorser10

Welcome Remarks:

Ariya Tiranaprakij
Executive Vice President
Thai Bond Market Association11

Co-hosts

Lead Sponsor

Endorser

12

Keynote Address:

Dr. Vachira Arromdee
Assistant Governor, Financial Markets GroupBank of Thailand13

Co-hosts

Lead Sponsor

Endorser

14

ASIFMA Regional Update:Philippe Dirckx
Managing Director – Head of Fixed Income
ASIFMA

15

Areas to cover:•••

IBOR Transition Guide for Asia published by ASIFMA, ICMA, ISDA andAPLMA, with contribution from Deloitte and Morgan Lewis.

Survey of ASIFMA Members on external frictions yet to be resolved
Regional education program: Singapore, Malaysia, Philippines,
Thailand, Vietnam, Indonesia, and India
16Co-hosts

Lead Sponsor

Endorser17

Impact of LIBOR Transition on Thai Banking Industry and Key
Considerations for a Smooth Transition:

Sinsiri Thangsombat
Assurance Leader
PwC Thailand

18

Impacts of LIBOR
phase out inThailandSinsiri Thangsombat

Strictly private and confidential
November 2020

Benchmark reform
Development of Thai interest ratebenchmark reform
•

•

PwC

The majority of money market transactions are carriedout in overnight markets, particularly private
repurchase (PRP) transactions where:•

the PRP market is highly liquid.

•

the PRP overnight rate reflects domestic money
market conditions, moves correspondingly withthe policy rate, and is not sensitive to USD
liquidity constraints.

So, the PRP market’s overnight rate can be used todevelop a reliable underlying interest rate.

20

Interest rate benchmarks in the Thai financial market
The characteristics of interest rate benchmarks in the Thai financial market are:

StatusUnderlying market
Data collection
methodTerms

Correlation with thepolicy rate

THBFIX

BIBOR

THOR

Will ceasewhen LIBOR is discontinued(Fallback THBFIX is a fallback rate)

Unchanged

New

USDTHB Swap

Unsecured interbank

Interbank private repurchaseTransaction-based (since 2019)

Survey-based

Transaction-based- Overnight- 1 week- 1, 3, 6 months- 1 year(Fallback THBFIX is only available for 1,
3, 6 month rates)-

Overnight
1 week
1/2/3/6 months
1 yearImpacted by USD liquidity

Term rates do not reflect
future rate expectations due
to low transaction volume

Overnight (compounded
overnight rate is used as a
backward-looking term rate)

Source: https://www.bot.or.th/English/FinancialMarkets/Documents/Eng%20THOR%20User%20guide.pdf
PwC

21

Thai Overnight Repurchase Rate (THOR)
Thai Overnight Repurchase Rate (THOR)•

Thailand’s underlying rate calculated from the PRP
overnight rate is referred to as the ‘Thai Overnight
Repurchase Rate’ (THOR)o Administrator: Bank of Thailand (BOT)o Calculation agent: the Thai Bond Market Association(ThaiBMA)o Published on BOT’s and ThaiBMA’s websites daily at
5pm•

BOT facilitates financial institutions who wish to use THOR
as an underlying interest rate by providing the following
information:o THOR Index represents the cumulative value ofcompounding THOR over time, with an initial value of
100 on April 1, 2020 (the first day of publication).
o THOR average is the term rate obtained fromcompounding the daily values of THOR (compound
setting in arrears method) for the tenors 1 month, 3
months, and 6 months.
o THOR calculator is a tool for calculating thecompounded THOR for a specified period, which is
obtained from THOR Index.

Source: https://www.bot.or.th/English/FinancialMarkets/Documents/Eng%20THOR%20User%20guide.pdf
PwC

22

Future developments for THORBank ofThailandThe Steering
Committee on
Commercial
Banks'
Preparedness on
LIBOR
Discontinuation

Thai
Bankers’
Association

Key tasks
1. The amendment of financial contracts
referencing LIBOR and THBFIX, including
loan, notes and derivative contracts.
2. The preparation of commercial banks for
LIBOR transition.
3. The development plan for an alternative
Thai reference rate.

Association of International Banks

Source: https://www.bot.or.th/English/FinancialMarkets/Documents/Eng%20THOR%20User%20guide.pdf
PwC

23

Regulatory expectations for key milestones
Milestone
1

2

LIBOR Sunset
Stopping new LIBORreferenced issuance(expiring/ maturing after2021)*
Issue RFR products

US – ARRC

UK - RFRWG

Dec 2020: FRNs
June 2021: Business loans, floating-rate
securitizations (other than CLOs), andderivatives
Sep 2021: CLOs
Dec 2020: Dealers to make markets innonlinear RFR derivatives
March 2021: Dealers to change market
convention for quoting USD derivatives
from LIBOR to SOFR

Q1 2021: Linear derivatives and cash Q2 2021: Loans andproducts (other than risk
bonds
management)
Q2/Q3 2021: Non-linear/ CCY
derivatives-

HK - HKMA

SG - ABSJun 2021: All products

April 2021: SOR Loans

Jan 2021: FIs ready tooffer RFR products

Feb 2021: D-SIBs to
issue a full suite of SORA
products
April 2021: All banks tooffer full suite of SORA
products

3

IT Readiness:
IT Readiness to handle
RFR average / compound
average

Vendor readiness dates are as follows:
June 2020: Floating rate notes
Sept 2020: Business and consumerloans
Dec 2020: Securitizations

Q3 2020: Key infrastructure available
from Treasury systems /loan vendors
Q4 2020: Operational readiness to
support non-linear SONIA derivatives

4

Remediate Contracts
Hardwired fallbacks
requiredQ3 2020: Include contractual
mechanisms (Active Transition
Clauses) in all new LIBORrefinanced products5

Remediate contracts to
reduce LIBOR exposure
significantly on- / off- BS

Include ARRC recommended fallbacks:
June 2020: New FRNs, ARMs, andsecuritisations
Sept 2020: New syndicated business/
student loans
Oct 2020: New bilateral business loans
Dec 2020: Dealers should amend
interfirm CSAs

6

Contract Remediation
Sign ISDA protocol

Jan 2021 (3-4 months after
publication)

Jan 2021 widespread sign up aheadof effective date

PwC

Japan - BOJ CIC

Q2/ Q3 2021: Complete active
conversion of cash products. Actively
convert linear derivatives where
viable.

Q4 2020: Manual
workarounds to support
new products
Q1 2021: Systems/
operations for new RFR
products
Q3 2020: Publish theamended definitions andprotocolJan 2021: FIs ready tooffer RFR products andare allowed manual
workarounds

Jan 2021: Fallback to be
included in all new
LIBOR- linked contracts(type of fallback
unspecified)

Q2 2021: Incorporate
fallbacks for legacy cash
products

Q3 2020: Start
negotiations among
contracting parties
Q3 2021: Significantly
reduce LIBOR loans and
bonds

-

Q3 2021: Banks to
reduce exposure to SOR
derivatives by 80% (fromlevel in May 2020)

Jan 2021: HKMA advised Sign up for the ISDA
to take early action to
protocol for SOR
adherederivatives
24Eight transition areas
Issue new products••••

Establish transition strategy for new products
Navigate new product approval
Execute test trades and pilot issuances
Shift to full-scale programs as soon as practicable

Remediate infrastructure• Identify impacted business processes and systems andtypical lead time required for changes• Determine changes required and dependencies• Remediate internal systems and manage remediation ofvendor systems

Issue newproducts

Risk and valuation models
Remediate
IT systems

Client outreach• Determine engagement strategy with industry groups andtrade associations• Develop engagement approach with regulatory bodies e.g.
consumer protection• Coordinate customer outreach across businesses• Evaluate impact of timeline differences across jurisdictions
PwC

Risk andvaluationmodels• Identify, enhance and validate all models required toswitch from IBOR to new rates• Develop data time series for risk and capital models• Develop framework for simulation of the uncertainty of
new rates for capital and funding requirements

Tax andaccountin
g impacts

Tax, accounting and other impacts

IBOR &
Reference
Rate Reform

Remediate contracts• Perform contract discovery• Analyse contracts• Establish business rules, templates and playbooks fortransition• Execute repapering

Remediate
treasury

Remediate treasury• Manage transition across cash instruments, debt and derivatives• Manage transition of cross-currency positions• Manage investment portfolios through transition

Remediate
contracts

Clientoutreach• Determine impact of new hedge accounting standards• Evaluate operational approaches to contract
modification and potential tax impact triggered bymodifications

Conduct risk

Manage conduct risk
• Define internal and external communication strategies• Establish clear policies, procedures and controls• Maintain transparent and open communication withregulators

25

Thank you
pwc.com© 2020 PricewaterhouseCoopers ABAS Ltd. PwC refers to the Thailand member firm, and may sometimes refer to the PwC network. Each member firm is a separate
legal entity. Please see www.pwc.com/structure for further details.

Co-hosts

Lead Sponsor

Endorser27

Product Presentations on Derivatives, Bonds and Loans

Jing Gu
Head of Legal, Asia Pacific
ISDA

Mushtaq Kapasi
Managing Director –Chief Representative Asia Pacific
ICMA

Fergus Evans
Partner
Clifford Chance28

Product Presentations on Derivatives

Jing Gu
Head of Legal, Asia Pacific
ISDA

29

Benchmark Reform Update
November 24, 2020

Implementation of Fallbacks in Derivative Contracts
Jing Gu
Head of Legal, Asia Pacific
ISDA®ISDA is a registered trademark of the International Swaps and Derivatives Association, Inc.

Copyright © 2020 International Swaps and Derivatives Association, Inc.

ISDA IBOR Fallback UpdateOverview of alternative RFR identification
Working Groups in each jurisdiction have recommended robust, alternative RFRs to transition away from existing IBORs, the alternative RFRbenchmarks are overnight, whereas the current use of IBORs is largely in term rates.
JurisdictionUK

USWorking Group

Working Group on
Sterling Risk-Free
Reference Rates

Alternative Reference
Rates Committee

Alternative RFR

Reformed Sterling
Overnight Index
Average (SONIA)

Rate
administration

Bank of England

Secured OvernightFederal Reserve
Financing Rate (SOFR) Bank of New York

Characteristics

Secured vs.
Anticipatedunsecured publication date

Description

Currently being
published• Fully transaction-based• Encompasses a robust underlying market• Overnight, nearly risk-free reference rate
• Includes an expanded scope of transactions to incorporate overnight unsecured transactions
negotiated bilaterally and those arranged with brokers• Includes a volume-weighted trimmed mean

SecuredCurrently being
published• Fully transaction-based• Encompasses a robust underlying market• Overnight, nearly risk-free reference rate that correlates closely with other money market
rates• Covers multiple repo market segments, allowing for future market evolution• Fully transaction-based• Encompasses a robust underlying market• Overnight, nearly risk-free reference rate
• Includes a volume-weighted trimmed mean

Unsecured

Working Group on RiskFree Reference Rates for
the Euro Area

European ShortTerm Rate(€STR)

European Central
Bank

Unsecured

Currently being
published

Switzerland

The National Working
Group on CHF Reference
Rates

Swiss Average Rate
Overnight (SARON)SIX Swiss Exchange

SecuredCurrently being
published• Became the reference interbank overnight repo on 25 August 2009
• Secured rate that reflects interest paid on interbank overnight repoJapan

Study Group on Risk-Free
Reference Rates

Tokyo Overnight
Average Rate
(TONA)

Unsecured

Currently being
published• Fully transaction-based benchmark for the robust uncollateralized overnight call rate market• The Bank of Japan calculates and publishes the rate on a daily basis, using information
provided by money market brokers known as Tanshi• As an average, weighted by the volume of transactions corresponding to the rate

EuropeISDA IBORIBORFallback
FallbackUpdate
Update31 ISDABank of JapanISDA IBOR Fallbacks Supplement and Protocol• ISDA published the Protocol and finalised the Supplement to the 2006 ISDA Definitions (the Supplement) on 23
October 2020. https://www.isda.org/2020/10/23/isda-launches-ibor-fallbacks-supplement-and-protocol/• The Protocol will be effective three months later on 25 January 2021 (the Protocol Effective Date) and theSupplement will be deemed published and effective on the same date.
• The Supplement updates the Rate Options set out in the 2006 ISDA Definitions for certain interbank offered
rates (IBORs) to:– include new triggers and fallbacks in the event of a permanent cessation of those IBORs (and, for LIBOR
Rate Option, in the event of a ‘pre-cessation’ of LIBOR Rate Option). Each Rate Option will first fall back toa term adjusted risk-free rate for the relevant currency plus a spread and then to further specific fallbacks
for each currency;– include discontinued rates maturities provisions, which contemplate interpolation if one or more IBOR
tenors are withdrawn or, in respect of LIBOR, become non-representative; and– provide specific adjustments for Calculation Periods to which ‘Linear Interpolation’ is specified to apply.
• New derivative contracts that incorporate the 2006 ISDA Definitions from 25 January 2021 onwards will
incorporate the 2006 ISDA Definitions as amended by the Supplement.
• The Protocol allows parties to include the terms of the Supplement in their existing Protocol Covered
Documents.
32 ISDA IBOR Fallback Update

Rate Options amended by the Supplement
Currency

Relevant IBOR and Rate Options

Sterling LIBOR

GBP

GBP-LIBOR-BBA; GBP-LIBOR-BBA-Bloomberg
Swiss Franc LIBOR

CHF

CHF-LIBOR-BBA; CHF-LIBOR-BBA-Bloomberg
U.S. Dollar LIBOR

USD

USD-LIBOR-BBA; USD-LIBOR-BBA-Bloomberg
EUR LIBOR and EURIBOR

EUR

Underlying Rate for Fallback Rate
Reformed SONIA

SARON

SOFR

€STR

EUR-LIBOR-BBA; EUR-LIBOR-BBA-Bloomberg; EUR-EURIBOR-Reuters
JPY LIBOR, Yen TIBOR and Euroyen TIBOR
JPY

JPY-LIBOR-FRASETT; JPY-LIBOR-BBA; JPY-LIBOR-BBA-Bloomberg; JPY-TIBOR-17097; JPY-TIBOR-TIBM (All Banks)Bloomberg; JPY-TIBOR-ZTIBOR

AUD

CAD

HKD

SGD

THB

33 ISDA IBOR Fallback Update

BBSW
AUD-BBR-AUBBSW; AUD-BBR-BBSW; AUD-BBR-BBSW-Bloomberg
CDOR
CAD-BA-CDOR; CAD-BA-CDOR-Bloomberg
HIBOR
HKD-HIBOR-HKAB; HKD-HIBOR-HKAB-Bloomberg
SOR
SGD-SOR-VWAP
THBFIX
THB-THBFIX-Reuters

TONA

AONIA

CORRA

HONIA

Fallback to be based on USD/SGD FX transactions and SOFR

Fallback to be based on USD/THB FX transactions and SOFRIBOR Fallbacks: ISDA’s Work – Fallback Rate•

A number of key Asian benchmarks are synthetic benchmarks derived by applying a forward FX curve to the USD LIBOR
curve. When USD LIBOR is no longer available after the end of 2021, the sustainability of these benchmarks is in doubt:• Key benchmarks are: SOR (Singapore); THBFIX (Thailand); MIFOR (India) and PHIREF (Philippines).
• Planning for the cessation of LIBOR is led by the respective administrators and regulators of these benchmarks. Some have
replacement rates for new transactions identified and transition timelines in place (SOR and THBFIX), whereas others are
yet to identify the replacement rates.
• ISDA IBOR Fallback Protocol and Supplement cover SOR and THBFIX• Links to the National RFR Working Groups in the APAC region••

https://www.bot.or.th/Thai/FinancialMarkets/Pages/ReferenceInterestAndEndOfUseLIBOR.aspx
https://www.abs.org.sg/benchmark-rates/about-sora•

https://www.tma.org.hk/en_market_LIBOR.aspx•

https://afma.com.au/ibor_transformation_working_grouphttps://www.isda.org/2020/05/11/benchmark-reform-and-transition-from-libor/•https://www.boj.or.jp/en/paym/market/jpy_cmte/index.htm/

34 ISDA IBOR Fallback Update

Scope of the Supplement• The Supplement is a Supplement to the 2006 ISDA Definitions that:– updates the Rate Options to include new triggers and fallbacks in the event of a permanent cessation and, for LIBOR
Rate Options, non-representativeness of the relevant rate. Each Rate Option will first fall back to a published fallback
rate calculated based on a term adjusted risk-free rate (“RFR”) for the relevant currency plus a spread and then to further
specific fallbacks if that published fallback rate is discontinued. The Supplement amends the following Sections in the2006 ISDA Definitions:–7.1(w)(i) (“GBP-LIBOR-BBA”); 7.1(w)(ii) (“GBP-LIBOR-BBA-Bloomberg”); 7.1(y)(i) (“CHF-LIBOR-BBA”); 7.1(y)(ii) (“CHF-LIBOR-BBA-Bloomberg”); 7.1(ab)(xxii)(“USD-LIBOR-BBA”); 7.1(ab)(xxiii) (“USD-LIBOR-BBA-Bloomberg”); 7.1(f)(v) (“EUR-LIBOR-BBA”); 7.1(f)(vi) (“EUR-LIBOR-BBA-Bloomberg”); 7.1(f)(i) (“EUREURIBOR-Reuters”); 7.1(l)(iii) (“JPY-LIBOR-FRASETT”); 7.1(l)(iv) (“JPY-LIBOR-BBA”); 7.1(l)(v) (“JPY-LIBOR-BBA-Bloomberg”); 7.1(l)(xviii) (“JPY-TIBOR-17097” );7.1(l)(viii) (“JPY-TIBOR-TIBM (All Banks)-Bloomberg”); 7.1(l)(ix) (“JPY-TIBOR-ZTIBOR”); 7.1(a)(iii) (“AUD-BBR-AUBBSW”); 7.1(a)(iv) (“AUD-BBR-BBSW”);
7.1(a)(v) (“AUD-BBR-BBSW-Bloomberg”); 7.1(b)(i) (“CAD-BA-CDOR”); 7.1(b)(ii) (“CAD-BA-CDOR-Bloomberg”); 7.1(g)(iii) (“HKD-HIBOR-HKAB”); 7.1(g)(iv)(“HKD-HIBOR-HKAB-Bloomberg”); 7.1(t)(iii) (“SGD-SOR-VWAP”); and 7.1(aa)(i) (“THB-THBFIX-Reuters”).

– a statement identifying the objective triggers that would activate the selected fallbacks (the trigger defined as ‘Index
Cessation Event’). The fallbacks will not apply until the actual discontinuation of the relevant IBOR (if that is after theannouncement date). This date is defined as the “Index Cessation Effective Date”.
– a description of the fallbacks that would apply upon the occurrence of that trigger, which will be:i.

the relevant RFR adjusted using methodologies to account for (A) the fact that the RFR is an overnight rate and (B)the various premia included within the IBOR; andii.

if the relevant RFR is permanently discontinued, one or more further fallbacks.

35 ISDA IBOR Fallback Update

How the new fallbacks work in practice• The RFRs for each currency are adjusted (1) to reflect the fact that the interbank offered rate (“IBOR”) is a term rateand (2) to factor in the bank credit risk premia and other factors embedded in the IBOR.

– The RFRs are term-adjusted using the compounded setting in arrears rate approach and the spread adjustment
is calculated using the five-year historical median approach.
– The compounded setting in arrears rate is the RFR observed over a period (generally equivalent to the relevant IBOR
tenor) and compounded daily. The period over which the RFR is observed is backward-shifted to allow for the rate to
generally be known prior to the relevant payment date.
– The five-year historical median approach to the spread adjustment is based on the median of the differences between
the IBOR and the compounded RFR for that tenor calculated over a static lookback period of five years prior to the Index
Cessation Event. The spread adjustment will be added to the compounded setting in arrears rate (but will not becompounded itself).

• Bloomberg Index Services Limited (“BISL”) is producing and publishing the compounded setting in arrears rate, the spreadadjustment and the “all in” fallback rate (i.e. the compounded setting in arrears rate plus the spread adjustment) for all
relevant IBORs except for SOR and THBFIX. BISL currently publishes this information on an “indicative” basis and will continue
to publish the information on an ongoing basis after a trigger event occurs (although the spread adjustment will be frozen
after that date). The fallbacks for SOR and THBFIX are published by ABS and Bank of Thailand respectively.

36 ISDA IBOR Fallback Update

SOR and TBHFIX Fallbacks
SOR and THBFIX Rate Options are also updated pursuant to the Supplement. USD LIBOR is a component in the calculationof SOR and THBFIX and therefore a permanent cessation or non-representativeness of USD LIBOR will impact thecalculation of these Rate Options. The new fallbacks for these rates are based on actual transactions in the USD/SGD or
USD/THB FX swap market and a USD interest rate calculated by reference to the fallback rate produced for USD LIBOR, i.e., .
Fallback Rate (SOFR)▪ each is a “LIBOR Rate Option” as defined in the Supplement• Index Cessation Event (Permanent cessation and pre-cessation of USD LIBOR) and Index Cessation Event
Effective Date (i.e., the first date on which SOR/THBFIX is no longer provided)▪ Fallback Rate (SOR) is published by ABS and Fallback Rate (THBFIX) is published by Bank of Thailand▪ Fallback to Fallback Rate (THBFIX) – BOT Recommended Rate

▪ a new Section 7.10 and 7.11 are added for SOR and THBFIX▪ Section 8.5 (Application of Discontinued Rates Maturities Provisions) is disapplied for SOR and THBFIX“Fallback Rate (THBFIX)” means the rate based on actual transactions in the U.S. Dollar/Thai Baht foreign exchange swap

market and a U.S. Dollar interest rate calculated by reference to “Fallback Rate (SOFR)” (as set out in the definition of “USDLIBORBBA”) including any fallback rate that may apply pursuant to that definition for a period of the Designated Maturity
provided by the Bank of Thailand (or a successor provider), as the provider of Fallback Rate (THBFIX), on the Fallback Rate
(THBFIX) Screen (or by other means) or provided to, and published by, authorized distributors.
provider)37 ISDA IBOR Fallback Update

What documents are within the scope of the Protocol?
• The amendments contemplated by the Protocol are actually made to Protocol Covered Documents on the later of the (i) the Implementation Dateand (ii) the Protocol Effective Date (January 25, 2021).
• The Protocol enables parties to introduce the new fallbacks included in the Supplement in existing ISDA Master Agreements, ISDA Credit Support
Documents and Confirmations, provided they are Protocol Covered Documents. Protocol Covered Documents are documents which fulfil the below
criteria for Protocol Covered Master Agreements, Protocol Covered Credit Support Documents or Protocol Covered Confirmations.
• The Protocol also applies to certain non-ISDA master agreements and non-ISDA credit support documents between adhering parties, provided theysatisfy the criteria in the definition of Protocol Covered Documents. Such documents are listed in the Protocol as Additional Master Agreements
and Additional Credit Support Documents.
Protocol Covered Master Agreement

Protocol Covered Credit Support Document

Protocol Covered Confirmation

An ISDA Master Agreement or Additional Master
Agreement entered into by adhering parties that is dated
before the Protocol Effective Date or, if later, the date ofacceptance by ISDA of an Adherence Letter from the laterof the two adhering parties to adhere, that:An ISDA Credit Support Document or Additional Credit
Support Document entered into by adhering parties
that is dated before the Protocol Effective Date or, if
later, the date of acceptance by ISDA of an Adherence
Letter from the later of the two adhering parties toadhere, that:

A confirmation entered into by adhering parties that isdated before the Protocol Effective Date or, if later, thedate of acceptance by ISDA of an Adherence Letterfrom the later of the two adhering parties to adhere,
that:1) incorporates a Covered ISDA Definitions Booklet (e.g.
the 2006 ISDA Definitions);
2) references an IBOR “as defined” in or otherwise
provides that the IBOR has the meaning given in a
Covered ISDA Definitions Booklet (e.g. GBP-LIBORBBA, as defined in the 2000 ISDA Definitions); and/or
3) references an IBOR howsoever defined (e.g. LIBOR).

38 ISDA IBOR Fallback Update1) incorporates a Covered ISDA Definitions Booklet;2) references an IBOR “as defined” in, or otherwise
provides that the IBOR has the meaning given in, aCovered ISDA Definitions Booklet; and/or
3) references an IBOR howsoever defined.

1) supplements, forms part of and is subject to, or isotherwise governed by, a Master Agreement andincorporates a Covered ISDA Definitions Booklet;
2) supplements, forms part of and is subject to, or
otherwise governed by a Master Agreement andreferences an IBOR “as defined” in, or otherwise
provides that the IBOR has the meaning given in, aCovered ISDA Definitions Booklet; and/or
3) supplements, forms part of and is subject to, or isotherwise governed by, a Master Agreement andreferences an IBOR howsoever defined.

Bilateral Templates
ISDA has published the following templates relating to the application of the Protocol, which allow parties to:

Bilaterally adopt theProtocolLong form

Short form

39•

Form of amendment agreement•

Form of amendment agreement•

Enables parties to amend one or more of their existing
documents to incorporate by reference the terms of the
Attachment to the Protocol and to include additional terms,
including from templates published separately by ISDA, tosupplement the terms of the Protocol or to amend its scope•

Enables parties to amend one or more of their existing
documents to incorporate the relevant terms of the Attachment
to the Protocol and to include additional terms, including from
templates published separately by ISDA, to supplement theterms of the Protocol or to amend its scope•

Both a Principal version and an Agency version have been
published•

Includes the text of the Attachment to the Protocol in full•

Both a Principal version and an Agency version have been
published

ISDA
Conference:
ISDA Virtual
IBOR Fallback
Update Understanding the New IBOR Fallbacks

Bilateral Templates (cont.)

Amend the terms of the Protocol inexisting agreements

40•

Form of amendment agreement•

Enables parties who have adhered to the Protocol to amend the scope and terms of the Protocol in relation to one or moreexisting confirmations, existing master agreements or existing credit support documents that are Protocol Covered
Documents by including additional template language published separately by ISDA in the form of amendment agreement•

Both a Principal version and an Agency version have been published

ISDA
Conference:
ISDA Virtual
IBOR Fallback
Update Understanding the New IBOR Fallbacks

Bilateral Templates (cont.)

Include additional documents
within the scope of the Protocol

Disapply the ‘pre-cessation’ trigger
set out in the Protocol in existing
agreements:•

Template language (not a form ofamendment agreement)•

Template language (not a form ofamendment agreement)•

Enables parties to include one or moreexisting master agreements or existing
credit support documents (that are not
Protocol Covered Documents) within
the scope of the Protocol as “Additional
Master Agreements” or “Additional
Credit Support Documents”•

Enables parties to disapply the ‘precessation’ trigger that is ‘hardwired’
into the ‘Index Cessation Event’ trigger
and in related provisions in some or all
documents that are amended by theProtocol41

ISDA
Conference:
ISDA Virtual
IBOR Fallback
Update Understanding the New IBOR Fallbacks

Apply the terms of the Protocol to new agreementsthat do not incorporate the 2006 ISDA Definitions anddisapply the ‘pre-cessation’ trigger set out in the
Protocol•Template language (not a form of amendment
agreement)•

Enables parties to (i) apply the terms of the Protocol
to their new confirmations, master agreements or
credit support documents that do not incorporate
the 2006 ISDA Definitions and (ii) if they choose to doso, disapply the ‘pre-cessation’ trigger that is‘hardwired’ into the ‘Index Cessation Event’ trigger
and in related provisions in the Protocol

IBOR Fallbacks: Additional Information• ISDA/Bloomberg/Linklaters IBOR Fallbacks Fact Sheet• Understanding IBOR Benchmark Fallbacks• Benchmark Reform at a Glance• IBOR Transition Guide for Asia co-published by ISDA, ASIFMA, ICMA and APLMAAll of these materials, as well as additional information about ISDA’s work to implement IBOR fallbacks
and other benchmark reform initiatives, are available on the ISDA Benchmark Reform and Transition
from LIBOR webpage at https://www.isda.org/2020/05/11/benchmark-reform-and-transition-fromlibor/

42 ISDA IBOR Fallback Update

Co-hosts

Lead Sponsor

Endorser43

Product Presentations on Bonds

Mushtaq Kapasi
Managing Director –Chief Representative Asia Pacific
ICMA

44

International Capital Market Association

ICMA

45

Adoption of risk-free rates in bond markets

A lot of progress has already been made with the adoption of new RFRs in bond markets:
US Dollar:•

Over US$650 billion of SOFR-linked FRNs•

Mainly SSAs, financial institutions•

Conventions are evolving•

SOFR Index now available

UK Sterling:•

Approx. 190 SONIA-linked FRNs and securitisations totalling approx. £90 billion•

Mainly SSAs, banks and building societies, with a broadening base of investors•

Same market conventions so far – “lag” approach to weighting, also favoured by the loan market•

SONIA Index made available in early August – but only compatible with “shift” approach to weighting•

Work still to be done on conventions

46 46

New contracts referencing IBORs : fallbacks

The official sector in the US and the UK encourage use of risk-free rates instead of
LIBOR in new bond issuance:•

If this is not possible, any new contracts referencing LIBOR and maturing beyond 2021 should
contain robust fallbacks to risk-free rates•

For new USD LIBOR FRN contracts, the ARRC (Alternative Reference Rates Committee) in the
US has produced a hardwired waterfall of fallbacks•

In the UK, fallbacks which address a permanent cessation or pre-cessation of IBORs have beenused since mid-2017. These are typically benchmark and currency agnostic•

GBP LIBOR-referencing FRN and securitisation transactions have all but ceased

47 47

The conversion of Legacy Bonds“Legacy Bonds” are bonds which reference LIBOR and are due to mature beyond theend of 2021, when LIBOR may no longer be available:•

It has been estimated that the global total of Legacy Bonds is more than US$800 billion
equivalent•Around 80% of that total references USD LIBOR•In the UK market, estimates suggest around 700 ISINs for GBP LIBOR Legacy Bonds acrossapprox. 430 deals•

If LIBOR is discontinued, many Legacy Bonds will fall back to a fixed rate, in accordance withthe fallbacks drafted into the documentation at a time when permanent discontinuation of therate would not have been anticipated•This may be commercially unpalatable

48 48

Options for Legacy Bonds – consent solicitation

The official sector in the US and the UK have continually stressed the increasing
importance of transitioning Legacy Bonds away from LIBOR:•

Unlike derivatives, bonds are contracts between multiple parties and are freely tradeable,
meaning the identity of the parties can change•

Bonds cannot be amended by way of adherence to an industry protocol•

Bonds usually contain provisions allowing the terms of the contract to be amended - thisrequires consent from bondholders by way of consent solicitation•

Depending on the governing law of the bond, the consent threshold required foramendments of interest rate provisions may be high (e.g. 75% under English law, and100% under NY law)•

Amending bonds by way of consent solicitation is a voluntary process, with no guarantee ofsuccess. It is also time-consuming and administratively burdensome for issuers and bondholders•

But in the UK, a number of consent solicitations have been successfully undertaken by financial
and corporate issuers

49 49

Options for Legacy Bonds - UK ‘tough legacy’ proposals

Some Legacy Bonds may fall into a ‘tough legacy’ bucket (i.e. cannot remove their relianceon LIBOR ahead of its anticipated discontinuation):• The UK Government put forward draft legislation in October 2020
• The FCA would be empowered to direct LIBOR’s administrator to change the methodology
for LIBOR in certain circumstances (so-called “synthetic LIBOR”)• There would be a general prohibition on the use of “synthetic LIBOR” by UK supervised
entities, subject to specific exemptions granted by the FCA• Some details still unknown, including what “synthetic LIBOR” will be and how long“synthetic LIBOR” will continue to exist• There is no guarantee that the FCA can or will exercise these powers, or that they will
suit all Legacy Bonds. So the FCA and Bank of England are urging parties to continue with“active transition” in order to retain control of the economic outcome

50 50

Options for Legacy Bonds - Possible US legislative proposal
In the US, where consent solicitation is more problematic, the ARRC has set out aproposal for possible NY state legislation for USD-LIBOR contracts:•

For contracts with no fallbacks, ARRC-recommended SOFR fallback rate + spread adjustment
would apply•

For contracts which fall back to a LIBOR-based rate, ARRC-recommended SOFR fallback rate +spread adjustment would apply•

For contracts where an agent has discretion to choose the new benchmark rate, the agent
would have protection under a “safe harbour” if the ARRC-recommended SOFR fallback rate +spread adjustment is chosen•

Counterparties making conforming changes to documentation to accommodate the transition
would also benefit from the safe harbour•

Parties would be able to mutually opt out•

It is not yet clear whether or when this will be enacted in NY law and how this would interact
in practice with the UK ‘tough legacy’ proposals and EU proposals

51 51

Options for Legacy Bonds - EU Benchmark Regulation proposals

The European Commission has proposed amendments to the EU Benchmark Regulation toaddress the phasing out of benchmark rates:• The proposal will empower the European Commission to designate a statutory replacement rate (taking account ofrelevant industry working group recommendations) to ensure that when a widely used reference rate (such as
LIBOR) is phased out, it does not cause disruption to the economy or harm financial stability in the EU• The statutory replacement rate will apply as a matter of law, thereby avoiding contractual conflicts• The statutory replacement rate will only be available for financial contracts that reference the benchmark at thetime this benchmark ceases to be published• At the same time, market participants are encouraged to agree on a permanent replacement rate for all new
contracts whenever feasible• The proposal is being considered by the EU co-legislators• More clarity should emerge on its scope and interaction with the US and UK proposals in due course

52 52

Other options for Legacy Bonds

Other options for Legacy Bonds include:•

Buy-backs, exchange offers or other liability management exercises•

Allowing existing fallbacks to operate without amendment (as a result of which, many FRNs
will become fixed rate unless the FCA is given, and exercises, powers to amend LIBOR
methodology, as outlined above)

53 53

Co-hosts

Lead Sponsor

Endorser54

Product Presentations on Loans

Fergus Evans
Partner
Clifford Chance

55

IBOR TRANSITION - LOANSFERGUS EVANS – CLIFFORD CHANCE
24 NOVEMBER 2020

DEVELOPMENTS IN ASIA LARGELY GUIDED BY
DEVELOPMENTS IN THE US, UK AND EUROPE“CLARITY ON THE EXACT TIMING AND
NATURE OF THE LIBOR STOP IS STILL TO
COME, BUT THE REGULATOR OF LIBOR HAS
SAID THAT IT IS A MATTER OF HOW LIBORWILL END RATHER THAN IF IT WILL END, AND
IT IS HARD TO SEE HOW ONE COULD BE
CLEARER THAN THAT.”– RANDAL QUARLES
VICE CHAIR FOR SUPERVISION, THE FED

Key transitional challenges faced across Asia:– Market adoption of ARRs:•“Low” awareness of LIBOR discontinuation and acceptance of ARRs•

Market players tend to follow global standards and adopt a “wait and see” approach•

Different ARRs will likely require different margins, which makes transition acrossAsia difficult due to variety of currencies– Calculation methodology for RFRs:•

High exposure of local banks to LIBOR– Legal issues (including legacy contracts):

IBOR TRANSITION - LOANS•

Lack of consistent amendment protocols across loan, derivatives and bond markets•

Uncertainty as to determination of substitution rates

CLIFFORD CHANCE|57

DON’T RELY SOLELY ON A LEGISLATIVE OR INDUSTRYSOLUTION

Avoid these common misconceptions:

1. IBORs will be extended by regulatory fiat: The FCA has said that perhaps a “zombie”
LIBOR could be extended for legacy contracts that are unable to be amended (but not for
new business).
DON’T
ASSUMETHAT:IBOR TRANSITION - LOANS

2. Industry working groups will provide a solution in time: All market participants arehoping for recommendations from the industry working groups. But financial institutions
need to plan their own strategy, in case the solutions don’t materialise in time. Banks may
also need to bilaterally vary individual contracts.

CLIFFORD CHANCE|58

DON’T RELY SOLELY ON A LEGISLATIVE OR INDUSTRYSOLUTION

Avoid these common misconceptions:3. The solutions for different products or across jurisdictions will align: The method of
amendment depends on the product in question. Counterparties may have different,
related products which presently utilise the same IBOR rate. Or multicurrency products.
Aligning the replacement rates across product, across currency, may be a challenge andgive rise to exposures for banks and/or its counterparties (e.g. basis risk).
DON’T
ASSUMETHAT:IBOR TRANSITION - LOANS

4. You can postpone any decision making: Regulators are focused on banks’ exposuresand scenario planning. Operational processes (whether involving people or systems) taketime to change and embed. Repapering exercises are likely to be large in scale andscope. We recommend action now, and the potential use of technology and third parties
to assist.

CLIFFORD CHANCE|59

MARKET DEVELOPMENTS
LMA / APLMA EXPOSURE DRAFTS (INCLUDING NEW RATE SWITCH(WITHOUT OBSERVATIONAL SHIFT) RCF)

• Transactions in the market based on
LMA/APLMA recommended forms
but – not Recommended Forms• Why?
– Move to RFRs requires creationand structuring of a new lending
product– RFR
abackward
looking
calculation of intertest rather thanforward looking IBOR
– Forward looking term rates being
developed but may not be
available or used as a market
standard in time for all currencies– RFR more robust as determined
on
the
basis
of
actualtransactions– Structuring issues for the market,
not the LMA/APLMAIBOR TRANSITION - LOANS• Purpose?
– Facilitate consideration of issues– Frameworkdeals.

fordocumenting

RFR• Issues identified in the CC/LMA/APLMA
Commentary– Lag Period (VS observational shift
approach)– Adjustment Spread– Compounding / non-Business Days /rounding– Fallbacks– Break Costs– Market Disruption• Some issues are commercial forborrowers to consider as a priority andsome issues will be more market led

CLIFFORD CHANCE|

60

LOANSLEGACY CONTRACTS

Contractual fallbacks• Legislative approach• Divergence of contractual approaches thatuse a waterfall of fallbacks?
• Use of “Hard Wiring” approach – ARRC
approach to fallbacks• Amendment approach – LMA / APLMA
approach to fallbacks• Consider what are the triggers for a change
to occur• If agreement needed then who needs toagree?
– LMA Screen Rate Replacement clause –recommended form includes a provision
to allow amendments to be made with alower consent threshold (majority lenders
only)– Timeline for amendments to be agreed
IBOR TRANSITION - LOANS

Timing of amendments• Multicurrency facilities
across currencies-

Market precedents

coordination• RFR-referencing transactions– Bilateral SORA loans• Synchronization with any related hedging.

– Bilateral SOFR loans• Operational capabilities. Majority v all
lender?

– SONIA facilities in the asset-backed
loan market• LMA revised “Replacement of ScreenRate” language aims to build ingreater flexibility• Spread adjustment
value transfer-

possibilityof– SONIA-referenced
LIBOR loans

alternatives

to– USD10b facility for Royal Dutch Shell,
one of the first and largest credit
facilities linked to SOFR
• Transactions with reference rate change
language– UK market precedents which are
initially written off LIBOR with a"switch"mechanic
allowingthetransactions to move to risk free rates– GBP 6b facility for British American
Tobacco
CLIFFORD CHANCE|

61

KEY CONTACTSSINGAPOREFERGUS EVANS
Partner
T +65 6506 2786
M +65 8798 8442
E fergus.evans@cliffordchance.com

IBOR TRANSITION - LOANS

CLIFFORD CHANCE|

62

Clifford Chance Pte Ltd, 12 Marina Boulevard, 25th Floor Tower 3,
Marina Bay Financial Centre, Singapore 018982© Clifford Chance 2020
Clifford Chance Pte Ltd

WWW.CLIFFORDCHANCE.COM

Co-hosts

Lead Sponsor

Endorser64

Data and Infrastructure Preparedness: Practical Challenges of IBOR
Transition:

Weng Khong Wong
Market Specialist –Fixed Income & Fixed Income Derivatives
Bloomberg LP

65

Data and Infrastructure Preparedness:

Practical Challenges of IBOR Transition
Wong Weng Khong
Fixed Income and Fixed Income Derivatives
Workflow Specialist
ASEAN, Bloomberg L.P.
wwong436@bloomberg.net
24th November, 2020

Impact across firms' workflows - the LIBOR transition lifecycle
After LIBOR cessation

1

4❖ All fallbacks triggered, fallback
calculations needed

Market informationand trade execution❖ Flexible rate calculation❖ Pricing, execution, valuation, andrisk for new rates supported forbusiness as usual activity❖ All securities fallback, use fallback
data to manage and track

Transition phase

Understand alternative rates, analyse and prepareInterest calculations,product pricing,valuation and scenarios
New rates curves
fully embedded,
flexibility to support
portfolio calculation
and analytics

Pricing, liquidity (and otherrelevant up-to-date info), andexecution capability❖ Accurate and extensive sources of
information on new rates, transition
activity and data
❖ For many bond/loan securities, varied
fallback, need to understand fallback
data❖ Understand and analyse current andfuture exposure, apply transition
scenarios

2

3

Trade / manage new products

Fallback data
❖ Fallbacks may be triggered, fallback
calculations needed❖ Understand actual and potential
risk/valuation impacts as transition
scenarios crystallise❖ Securities may fallback, use fallback
data to manage and track

67

Fallback calculations

Market reliance on thecalculations

Large universe of existing
securities for which clear
understanding of fallback
required❖ Pricing, execution, valuation, risk
and scenarios supported throughthe eco-system❖ Compounding methodologies canvary, flexible bespoke calculation
tools may be neededIdentify Overall Requirements for Cash Transition
Data-sets specific questions•

How and where to locate information on fallback provisions for cash products?

Assess readiness by considering
•
•
•
•

68

For legacy Libor trades: if you don’t get covered by the protocol then do you need bilateralnegotiations? How will a supplement to the protocol help ?
By when do I need to be ready with a “Fair Value Analysis”?
Is my Core Banking System ready to book new “IBOR/RFR based Loans” ?
Market participants should identify susceptible fallback provisions as they will likely change inthe future. They should also proactively monitor fallback languages incorporated in similarbond issuance for references.

Identify Overall Requirements for Derivatives Transition
Data-sets specific questions•

What new data sets are required as we transition to the new RFRs?

•

How will RFR data evolve as liquidity shifts?

•

Will term rates be available and what if not? How do I build curves?

Assess data in systems readiness by testing the following:•

Updated analytical models and scenario analysis across enterprise systems•

For trades referencing the new RFRs: capture all necessary attributes related to the new RFRs (e.g.
compounding conventions, index lag / lockout) and ensuring all pricing, risk and valuation models work
correctly.

•

Front Office, Finance, Risk, Operations and Admin.

69Planning for Transition

70Impact Assessment – Where to Begin

71

Data and Infrastructure - Quantify Valuation Impact in Libor Transition
Preparation required across all asset classes: cash, derivatives, and loans
DATA
Data
ISDA
• ISDA Rule Book & Technical
notes

DATA
Infrastructure
Fallback Language

Risk Systems• Daily refreshed fallback
language Data for 154,000
cash securities• Loans• CCP PAI from Fed Funds to
SOFR (Oct 2020)• Migration of Bilateral CSA• LIBOR Transition analysis• Derivative Structuring

Fallback• ISDA-BISL• Fallback, Spread Adjustments
and Adjusted Rates

Country Updates• Risk Free Rate Solutions

Analytics• Derivative Structuring of
RFR Instruments

Data• Reference Data
• RFR Benchmark Data
• RFR Interest Rate Curves• Where is LIBOR used

New Calculations• RFR Loans Calculator

Electronic Trading• Electronic Execution for RFR
Derivatives
RFR Adoption• FRN Issuance• Loans Issuance• RFR OTC Traded72

Available Today: ISDA Fallback Data•

Official ISDA IBOR Fallback Rates, calculated by Bloomberg Index
Services Limited. Visit FBAK<GO> or
https://www.bloomberg.com/professional/solution/libor-transition/

9 September 2020•

73

Standardized fallback language developed by
ISDA for derivatives contracts is a positive
step, offering the industry certainty.

Bloomberg Analytics for IBOR Transition
Portfolio Level Analysis

Custom Applications
via MARS API

Independent Valuations
via MARS

Deal Level Analysis

74

MARS API Use Case: Floating Rate Loans
Floating rate loans on new RFR indices such as SOFR, ESTR and
EONIA pose challenges for analytics such as accrued interest andeffective rate computations due to the complex nature of day count,compounding method and observation shifts.

EONC<GO>

MARS
API

Python,C++,
Java, etc.

75

Custom Loans Application

Summary: Benchmark Transition
1. Data

Fallback data forderivatives &cash fallback
language

2. Infrastructure.
Inventory &Systems

3. Communication

76

Cessation
scenarios andimpact analysis

Strategy basedon assessmentof legal andoperational
options

RFR curve andterm rates?

Accuracy, complianceof data used inmodels andcomplianceHandle multi curve
regime and RFR
compound factors,
coupons andcalculations

Clientcommunicationand disclosures

PAI and
CSA
repapering

Continuous
engagement withclients on risk,
plans,
preferences

Implement, test
and production

Transition
implementation
planningIndustry
discussions andclientparticipation

Thank You
The data included in these materials are for illustrative purposes only. The BLOOMBERGTERMINAL service and Bloomberg data products (the “Services”) are owned and distributed byBloomberg Finance L.P. (“BFLP”) except (i) in Argentina, Australia and certain jurisdictions in
the Pacific islands, Bermuda, China, India, Japan, Korea and New Zealand, where Bloomberg
L.P. and its subsidiaries (“BLP”) distribute these products, and (ii) in Singapore and thejurisdictions serviced by Bloomberg’s Singapore office, where a subsidiary of BFLP distributes
these products. BLP provides BFLP and its subsidiaries with global marketing and operational
support and service. Certain features, functions, products and services are available only tosophisticated investors and only where permitted. BFLP, BLP and their affiliates do notguarantee the accuracy of prices or other information in the Services. Nothing in the Services
shall constitute or be construed as an offering of financial instruments by BFLP, BLP or theiraffiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of aninvestment strategy or whether or not to “buy”, “sell” or “hold” an investment. Information
available via the Services should not be considered as information sufficient upon which to basean investment decision. The following are trademarks and service marks of BFLP, a Delaware
limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG ANYWHERE,BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL,
BLOOMBERG TERMINAL and BLOOMBERG.COM. Absence of any trademark or service markfrom this list does not waive Bloomberg’s intellectual property rights in that name, mark or logo.
All rights reserved. © 2020 Bloomberg.

Co-hosts

Lead Sponsor

Endorser78

Banking Panel on Implementation/Conduct Issues:
Varong Vongsinudom,First Vice President, Products
Solutions and Market Innovation
KrungThai Bank

Prapairat Wotticharoenvong
Senior Vice President, Market
Risk Management Division
Siam Commercial Bank

Tiak-Peow Phua
Executive Director,
Libor Transition, Conduct,
Financial Crime and ComplianceStandard Chartered

Ryan Page
Proposition Specialist
Refinitiv (moderator)79

Co-hosts

Lead Sponsor

Endorser80

Presentation on Local Implementation Use Case:

Mongkol Poonlapmongkol
Customer Success Manager – Indochina
Refinitiv Thailand

81

IBOR TRANSITIONLOCAL IMPLEMENTATIONREFINITIV
ASIFMA Virtual Event:Thailand IBOR Transition (in collaboration with Thai Bankers Association and Thai Bond Market Association)
24 November 2020

Mongkol Poonlapmongkol

IBOR REFORM
IBOR Reform and the transition into Risk-Free Rates (RFRs).
Problems for our customers and how we can solve these challenges.
While much of the market is expected to adopt these overnight RFRs administeredby central banks, pockets of demand for term rate benchmarks based on RFRs forloans and other cash products remain.

Refinitiv is committed to provide the data and benchmarks clients need toadjust operating models across front, middle, and back offices.
To create new financial products and ensuring we meet the high regulatory
standards required for benchmarks.

83

IBORs“ICE LIBOR also known as LIBOR, the London Interbank Offered Rate, is representative of the rates at whichlarge, leading internationally active banks with access to the wholesale, unsecured funding market could fundthemselves in such market in selected currencies for certain tenors.”
LIBOR=-LIBOR is currently produced in 7 tenors(overnight/spot next, one week, one month,
two months, three months, six months and
12 months) across 5 currencies.

-

It is based on submissions provided by apanel of 20 banks. These submissions areintended to reflect the interest rate at whichbanks could borrow money on unsecured
terms in wholesale markets.

84IBOR Reform
The New Risk-Free Rates
Jurisdiction

RFR

RFR
Announced

RFR Administrator

Description

Challenges

USD
LIBOR

SOFR

UK

GBP
LIBOR

SONIA

Euro zone

EURIBOR€STR

Switzerland

CHF
LIBOR

SARON

October 2017

SIX Swiss Exchange

Overnight repo transactions (existing)

Japan

TIBOR

TONA

December
2016

Bank of Japan

Overnight unsecured call rate(existing)

BBSW

Cash
Rate
(AONIA)2017

Reserve Bank of Australia

Overnight unsecured fund (existing)CanadaCDOR

Enhanced
CORRA

November
2018

Bank of Canada

Overnight repo transactions(enhanced)

Singapore

SIBOR

SORA

August 2019

Monetary Authority ofSingapore

Overnight unsecured transactions

Hong Kong

HIBOR

HONIA

April 2019

Treasury Markets
Association

Overnight unsecured transactions

Thailand

THBFIX

THOR

April 2020

Bank of Thailand

Overnight private repo transactions

USA

Australia

85

Existing
IBOR

Federal Reserve Bank of
New York

Overnight US Treasury repo (new)April 2018

Bank of England

Overnight unsecured deposit(enhanced)

October 2019

ECB

Overnight unsecured deposit (new)April 2018

Main Characteristics

RFRs

IBORs

Overnight Deposits

Interbank OfferedRates Overnight to1Year

Backward looking

Forward Looking

Risk Free or Nearly
Risk Free

Incorporates Credit
Risk

Transaction Based

Submission, or Partly
Transaction BasedIBOR Application on EIKON (WORKSPACE)
Access all new RFRs data, news, and analytics
Type IBOR• The IBOR Transition application keeps you up todate with global changes to interest ratebenchmarks.
• Provides news and values on a variety of rates:– Risk-free reference rates (RFRs)– IBORs– Brokers RFRs derivatived content (Fixing, OIS,
Basis Swaps, FRAs…)– Derived Analytics data: Term Rates,
Compounded Index, Zero Curves

86

THBREPO=BKTH.THOR (THOR Index)

Click THOR to access data

THBFIX → FALLBACK RATE (THBFIX)*Calculation and publication of Fallback Rate (THBFIX)
THBFIX

87*Tentative

FBKTHBFIXFBKTHBFIX1MFBKTHBFIX3M
FBKTHBFIX6M

THOR OIS
Indicative price: THBOIS=….

Spread THBFIX, THOR, etc.

88

OIS Curve

OIS Zero Curve:
0#THBOISZ=R

SWAP CALCULATIONSType “SWPR” to open the Swap Pricer calculator

Use new RFR OIS Zero Coupon
based curves in calculation

89

FALLBACK SOFR

SOFR

Fallback

90

SpreadAdjusted Reference RateTERM SONIA
Refinitiv, IBA, and FTSE-Russell for administer a forward looking GBP
LIBOR alternative
Withdrew intention to administer
term reference rates
Refinitiv

IBA

FTSE-Russell

IHS Markit

✓

✓

✓



Prototype live
Tenors• 1M, 3M, 6M,12M• 1M, 3M, 6M• 1M, 3M, 6M, 12M• 1M, 2M, 3M, 4M,
5M, 6M, 12M

Primary source• OIS committed quotes• TP ICAP iSwap &Tradition Trad-X• OIS committed quotes• TP ICAP iSwap,
Tradition Trad-X & BGC
Partners' BGC Trader•• Spot starting andforward startingOIS transactions

Secondarysource• OIS last look quotes• Tradeweb• SONIA-linked futures
settlement prices1• ICE Futures• N/A• Futures data

Tertiary source• SONIA

• N/A

• N/A

• SONIASampling• 40 snaps in 30 second
intervals• 24 snaps in 5 minuteintervals• 30 snaps in 20 second
intervals• Not specified

Collection
window• 10:50-11:10UK• 2-hour• 10:55-11:05UK• 24-hours

Publication time

• 11:50UK• 11:56UK• Not specified• Not specified

91•

OIS committed
quotesTP ICAP iSwap &Tradition Trad-X

Perspectives•

Refinitiv, IBA and FTSE Russell
designed rates that areconsistent with Working Group
recommendations2•

Refinitiv have differentiated vs.
peers

‒

12M tenor aids adoption in
Trade Finance market vs. IBA‒

Superior back up data source
vs. IBA and FTSE-Russellmeans more robust

EXCLUSIVE LIBOR TRANSITION NEWS
Browse Reuters News and IFR to find the latest information on LIBOR transition and new RFRs
Click Pop Up from the IBOR App to see the News,set up an Alert, save it to your Workspace...

92

Articles and analysis from IFR, enter IFR AND “SOFR”

International Financing Review (IFR)
Leading FI, capital markets, investmentbanking news and commentary

COMPOUNDING CALCULATIONS
Operational Infrastructure• Existing infrastructure includes a lot of legacy software that are based on forward looking cashflows• Usage of overnight rates –Transaction parties do not know the accrued amount on loans/derivative products
AHEAD of time
• Current infrastructure in banks and financial institutions are not equipped to seamlessly transition to churningout computations.
• Need changes to two types of financial infrastructure – Loans + Derivatives operational infrastructure• How does one make changes to the existing loan machinery, that is geared towards volume and consistency ?
Conventions and Complexities• Usage of the rates that are published by different authorities at different times. When to synchronize the rates ?
• Portfolio will comprise LIBOR linked and RFR linked products. It raises the bar to efficiently compute metrics
quickly.
• Terminology is evolving + Various combinations of features are being evaluated by practitioners• Systems Impacted across Treasury, Loans, Finance, Billing, Accounting, Tax
93

COMPOUNDING APPROACHES
What are the three common approaches ?

•Based on the type of cash product or derivative, there could be multiple ways to put in a payment structure•

Key Decision variables : What is the Observation Period ? What is the Interest Period ? What is the lag / lockout ?

Payment Delay with Lockout

Lookback

Backward Shift•

Interest Rate value frozen a few
days before the payment date•

Interest Rate value lagged by acertain number of business days•

Interest Rate values and Interest
Period is shifted backwards•

Floating Rate Notes (2-5 days)•

Standard Lag is 5 business days••

SOFR-referenced Floating Notes•

SONIA/SORA-referenced
Floating Notes

Standard Shift is 5 business
days•

Similar to OIS market
conventions

Interest Period

Interest Period

Interest Period

Shift

Observation Period
Rate Freeze
94

Observation Period

Observation Period
Lag

COMPOUNDED RATES CALCULATIONS

95

CENTRALIZING ACCESS, API
Addressing the challenge at the Enterprise level•

Unified analytics so that firms can access these analytics via API or FTP based flat-file download option•

Market data providers have access to all the underlying data needed and can provide reliable and robust capabilities•

Cloud delivery provides a unified API into existing infrastructure with no additional hardware footprint– Retrieve historical RFR averages published for standard tenors– Retrieve RFR compounding factors for flexible compounding periods to price non-standard interest cycles– Retrieve RFR compounding factors for Lookback, Payment Freeze and Observation Shift methods– Display all the relevant calculations

Historical Rates

Input: Start Date, End Date, Standard Tenor

Custom Tenors

Input: Start Date, End Date, Custom Tenor

Users

Analytics
Teams

API
Loan,
Derivative
Infrastructure

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Lookback

Input: Start Date, End Date, # of days for lookback

Backward Shift

Input: Start Date, End Date, # of days to shift

Payment Freeze

Input: Start Date, End Date, # of freeze days

THANK YOU

Refinitiv is one of the world’s largest providers of financial markets data and infrastructure, serving over 40,000 institutions in over 190 countries. It provides leading
data and insights, trading platforms, and open data and technology platforms that connect a thriving global financial markets community – driving performance intrading, investment, wealth management, regulatory compliance, market data management, enterprise risk and fighting financial crime.

Visit refinitiv.com@Refinitiv

Refinitiv

Co-hosts

Lead Sponsor

Endorser98

Closing Remarks:

Prut Sukcharoennukul
Account Director
Refinitiv Thailand99

Co-hosts

Lead Sponsor

Endorser

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Q&A

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Thank you for attending!
Please stay tuned for updates on our other virtual events.

www.asifma.org/events

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