Co-hosts

Lead Sponsor

Endorsers

1Agenda:Time

Session10:00-10:10

Welcome Remarks:• Mark Austen, CEO, ASIFMA• D.V.S.S.V. Prasad, CEO, FIMMDA• Sunil Mehta, Chief Executive, IBA

10:10-10:30

Keynote Address:• Dimple Bhandia, General Manager, Reserve Bank of India

10:30-10:35

ASIFMA Regional Update• Rebecca Weinrauch, Executive Director – Head of Fixed Income, ASIFMA

10:35-10:50

IBOR Transition: India Perspective• Kuntal Sur, Partner and Leader, Financial Risk and Regulation, PwC India; Knowledge Partner on LIBOR
Transition for IBA

10:50-11:05

Benchmark Presentation• Rudra Narayan Kar, CEO, FBIL

11:05-11:45

Product Presentations• Jing Gu, Head of Legal, Asia Pacific, ISDA
• Mushtaq Kapasi, Managing Director – Chief Representative Asia Pacific, ICMA
• Pranav Sharma, Partner, Financing, Cyril Amarchand Mangaldas

2Agenda:Time

Session

11:45-12:00

Data and Infrastructure Preparedness: Practical Challenges of IBOR Transition• Rohit Mandhotra, Risk Workflow Specialist, Bloomberg L.P.

12:00-12:30

Banking Panel on Implementation/Conduct Issues• Saurabh Chhabra, Co-head, Corporate Sales & Solutions Business, Citi South Asia
• Utkarsh Sharma, Head of Foreign Exchange and Derivative Trading, Deutsche Bank, India• Parul Mittal Sinha, Managing Director - Head of Financial Market Trading, India and South Asia, Standard
Chartered Bank

12:30-12:32

Closing Remarks• Aniket Patni, Regional Proposition Sales Director, Refinitiv

12:32-12:45

Q&A

3

Get Involved:

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

4Co-hosts

Lead Sponsor

Endorsers

5

Welcome Remarks:

Mark AustenCEO
ASIFMA

D.V.S.S.V. Prasad
CEO
FIMMDA

Sunil Mehta
Chief Executive
IBA

6

Co-hosts

Lead Sponsor

Endorsers

7

Keynote Address:

Dimple Bhandia
General Manager
Reserve Bank of India

8

Co-hosts

Lead Sponsor

Endorsers

9

ASIFMA Regional Update:Rebecca Weinrauch
Executive Director – Head of Fixed Income
ASIFMA

10

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
11Co-hosts

Lead Sponsor

Endorsers

12

IBOR Transition – India Perspective:

Kuntal Sur
Partner and Leader, Financial Risk and Regulation
PwC India; Knowledge Partner on LIBOR
Transition for IBA

13

IBOR Transition – India
Perspective
ASIFMA Event: India IBOR Transition
September 2020 | Webinar

www.pwc.com
Strictly private and confidential

IBOR - India Perspective
Recent Developments❑

Definitive steps have been taken by Indian Banking Association (IBA) by forming a dedicated Working Group with sole purposeof identifying the IBOR impact on Indian markets❑

The Working group is partnered by PwC and representatives from industry bodies like - FIMMDA, FEDAI, FBIL and Domestic
banks, Foreign Banks, Legal firm, etc.

❑

Three work streams are formed to access the overall transition management & fall-back language, to finalise the methodology for
Indian Benchmark (MIFOR) and Outreach to different stakeholders

Indian Benchmark❑

Indian Benchmark - MIFOR, which is derived implicitly from the rolling forward premia in percentage term and the USD LIBOR
for the relevant tenor will get impacted❑

There will be impact in Inter-bank market on Derivative contracts which uses MIFOR as underlying❑

Survey is conducted by PwC - IBA to the MIFOR market players for the alternate methodologies for adjusted and modified
MIFOR

Actions by the RBI and IBA

PwC❑'Dear CEO’ letter issued to all the bank CEOs in India on Aug 2020❑

Regular updates from IBA committee to RBI❑

IBA held discussions with ISDA, one of the point was - how ‘Adj MIFOR’ can be part of ISDA (supplementary) protocol❑

IBA is coordinating with FIBIL and CCIL on calculating ‘Adj MIFOR’ and to publish by the year-end
15

Banks are focusing on eight transition areas
Operational impacts from IBOR reform require change across functions, entities, systems and processes
Issue new products & pricings••••

Remediate treasury

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

•

Issue
New
Products

Remediate•

treasury•

Remediate Tech infrastructure•••

Identify impacted business processes and systems
and typical lead time required for changes
Determine changes required and dependencies
Remediate internal systems and manage
remediation of vendor systems

Risk and Valuation Models•••

Perform contract discovery
Analyze contracts
Establish business rules, templates and playbooks
for transition
Execute repapering

IT

IBOR &
Reference
Rate Reform

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

Impacts

ClientOutreach•

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

Tax, Accounting and other impacts

Accounting

Contracts••

Tax and

Remediate

Client outreach•

Risk and
Valuation
ModelsRemediate

Remediate Contracts•

Manage of transition across cash instruments, debt andderivatives
Manage transition of cross-currency positions
Manage investment portfolios through transition••

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
16

What are the Leading Banks doing?

PwC

I.

Created an internal working group / committee with representations from – treasury, risks, business, finance,
legal and technology

II.

Monitoring currency pairwise exposures (direct and indirect) – in particular exposures beyond Dec 2021

III.

Contract remediation – working on Fallback language – ARRC (Hardwired vs. Amendment Approach) and ISDA
rules (waiting)IV.

Technology remediation – having discussions with treasury and CBS vendors on the proposed changes in modules

V.

Based on RBI’s “Dear CEO” letter - presenting to Internal executive committees / RMC of Board – on Transition
Framework/ Policy

VI.

Initial stages on drawing comprehensive road-map covering all aspects like contract remediation, data and tech,new product development etc.

VII.

Monitoring the development of alternate benchmarks globally and strategizing accordingly

17Kuntal Sur

Thank you

PwC | Partner | Financial Risk and Regulation Leader
LL: +91 (22) 6669 1335 | HP: +91 9167778833
Email: kuntal.sur@pwc.com

pwc.inAll images in this presentation are protected by copyright, trademark, patent, trade secret and other intellectual property laws and treaties. Any unauthorised use of theseimages may violate such laws and shall be punishable under appropriate laws. Our sharing of this presentation along with such protected images with you does not
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gathering and extraction methods in connection with the presentation.
© 2020 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability
company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited(PwCIL), each member firm of which is a separate legal entity.
VS/April2019-17194

Co-hosts

Lead Sponsor

Endorsers

19

Benchmark Presentation:

Rudra Narayan Kar
CEO
FBIL

20

Seminar on IBOR Transition

Update on MIFOR Transition

Rudra Narayan Kar

Financial Benchmarks India Pvt. Ltd❖ Independent Benchmark Administrator in India in the areasof interest rates, foreign exchange and derivatives.
❖ Significant Benchmarks:▪ FBIL MIBOR▪ FBIL MIFOR▪ FBIL T-Bills Curve▪ FBIL Reference rates▪ FBIL G-sec valuation prices▪ FBIL SDL valuation prices

Background of MIFOR❖ Mumbai Interbank Forward Offered Rate, a synthetic Rupee
rate evolved during 1990s❖ A poll based benchmark published daily at 5 PM after LIBOR
is announced❖ Published by Reuters(Refinitiv) with FIMMDA co branding it❖ MIFOR Fixing largely used for valuation and settlement andreferences for IRS contracts❖ Developed as a hedging tool for long term FCY/INR currency
swap in the absence of an USD/INR basis swap market inIndia

FBIL MIFOR Methodology❖ FBIL commenced publication of transaction based
MIFOR from April 2018
❖ Data Source❖ MIFOR Tenors❖ Methodology – traded data and interpolation/
extrapolation techniqueNeed for Transition and Issues❖ LIBOR may cease to exist beyond December 2021

❖ FCA may not mandate the panel banks to makesubmissions❖ The ARRC has indicated the SOFR O/N rate may be theway forward❖ The SOFR term Curve yet to emerge❖ SOFR Compounded in Arrears is the preferred choice❖ Determination of rates for legacy Contracts❖ Developing New Reference Rate

International experience❖ Need for a forward looking curve – Current initiatives❖ Liquidity is the key challenge❖ ARRC has asked for bids to determine Term Curve❖ The case of SOR and SORA in Singapore❖ The case of THBFIX

The India Initiative❖ IBA Work Stream❖ Looks at Transition of MIFOR❖ Adjusted MIFOR❖ Modified MIFOR

Adjusted MIFOR❖ Three components for MIFOR curve construction❖ SOFR compounded in Arrears❖ Forward Premia a forward looking curve❖ Spread to be derived from SOFR and LIBOR 5 year
historical data.
❖ The Adjusted SOFR will be known at the end of theobservation period.
❖ Forward premia will be known at the start of theobservation period.

Determining the new Reference Rate
❖ Discussion in the IBA Work Stream❖ Menu of benchmarks available with FBIL- MIBOR, MROR, T-Bills
Curve and MIBOR OIS❖ These rates represent domestic IBOR and do not establish the link
between USD and INR interest rates❖ Cannot replace MIFOR unless Currency basis market is established❖ Modified MIFOR would depend upon the SOFR compounded inarrears and the USD/INR Forward Premia rate

❖ This raises issues about the benefits of a term curve, tax andaccounting and other issues

MIFOR Transition Timeline❖ Adjusted MIFOR Methodology to be ready by December 2020
❖ Testing of data in progress❖ Methodology document and sample data for significant tenors to
be made available to stakeholders for feedback shortly❖ Incorporating changes in ISDA protocol under evaluation❖ Issues involving Multilateral/ bilateral agreement among the banksin India being examined❖ Making all efforts to be in readiness to meet the timelines.

Thank You

Co-hosts

Lead Sponsor

Endorsers

32

Product Presentations:

Jing Gu
Head of Legal, Asia Pacific
ISDA

Mushtaq Kapasi
Managing Director –Chief Representative Asia Pacific
ICMA

Pranav Sharma
Partner, Financing
Cyril Amarchand Mangaldas33

Benchmark Reform Update
September 22, 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Preparing for IBOR transition
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
Update35 ISDABank of Japan

IBOR Fallbacks: ISDA’s Work – Fallback Rates (1)ISDA IBORIBORFallback
FallbackUpdate
Update36 ISDAIBOR Fallbacks: ISDA’s Work – Fallback Rate (2)•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▪ Index cessation event is triggered by the occurrence of an “Index Cessation Event” applicable to USD LIBOR• 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/

37 ISDA IBOR Fallback Update

IBOR Fallbacks: ISDA’s Work – Implementation of Fallbacks in Supplement
Form of Amendments• Supplement to the 2006 ISDA Definitions: To account for any permanent discontinuation of a relevant IBOR, amendments
to the floating rate options in Section 7.1 of the 2006 ISDA Definitions for the relevant IBORs will take the form of:–a statement identifying the objective triggers that would activate the selected fallbacks (the trigger defined as ‘Index
Cessation Event’); and–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 rateand (B) the various premia included within the IBOR; andii.

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

Upon publication of the Supplement, all new derivative transactions entered into on or after the date of theamendments that incorporate the 2006 ISDA Definitions will include the fallbacks (counterparties will not have to takeany additional steps).

38 ISDA IBOR Fallback Update

IBOR Fallbacks: ISDA’s Work – Implementation of Fallbacks in Protocol
Form of Amendments• ISDA 2020 IBOR Fallbacks Protocol: ISDA will also publish a protocol to facilitate inclusion of the amended floating rate options(i.e., the definitions with fallbacks) into existing derivative contracts entered into prior to publication of the Supplement.
–

Adherents to the Protocol will agree that derivative transactions that they have entered into with other adherents prior to
publication of the Supplement will be based on the relevant amended floating rate options in the 2006 ISDA Definitions,notwithstanding when the transactions were entered into.

–

The Protocol will cover those ISDA master agreements, ISDA credit support documents and confirmations that:
i.
ii.
iii.

–
–

incorporate one of several ISDA definitional booklets;
reference an IBOR as defined in or has the meaning in one of several ISDA definitional booklets; orreference an IBOR howsoever defined.

The Protocol will also extend to additional non-ISDA master agreements and credit support documents.
ISDA will also provide translation of the IBOR Fallbacks Supplement and Protocol for certain jurisdictions

39 ISDA IBOR Fallback Update

IBOR Fallbacks: ISDA’s Work – Triggers• The fallbacks apply upon the permanent discontinuation of the relevant IBOR (based on pre-determined, objective triggers)
and will be to the relevant alternative risk-free rate (RFR), subject to term and spread adjustments. The permanent
discontinuation trigger is defined as “Index Cessation Event” in the non-LIBOR Rate Options.
• The fallbacks will not apply until the actual discontinuation of the relevant IBOR (if that is after the announcement date). Thisdate is defined as the “Index Cessation Effective Date”.
• For LIBOR in GBP/CHF/USD/EUR/JPY, the fallbacks apply upon the earlier to occur of (i) the permanent discontinuation or (ii)the non-representativeness (as determined by the UK FCA) (a so-called “pre-cessation” trigger) of LIBOR in the relevant
currency (based on pre-determined, objective triggers) and will be to the relevant alternative RFR, subject to term and spreadadjustments. The combined permanent discontinuation and pre-cessation trigger is also defined as “Index Cessation Event”
in the LIBOR Rate Options.
o The Index Cessation Effective Date for the pre-cessation trigger will be the date on which LIBOR in the relevant currency ‘is nolonger representative’, which may either coincide with or be after the date of an announcement that it is ‘no longer capable ofbeing representative’.
o Statement from the UK FCA regarding announcement of contractual triggers for LIBOR available athttps://www.fca.org.uk/markets/transition-libor/libor-contractual-triggers

40 ISDA IBOR Fallback Update

IBOR Fallbacks: Adjustments to Fallback Rates
Form of Adjustments• The RFRs are adjusted (1) to reflect the fact that the IBOR is a term rate and (2) to factor in the embedded bank credit spreadelement of the IBOR.
• The current methodology is:–

RFRs are based on the compounded setting in arrears rate and the five year historical median approach to the spreadadjustment.

–

The compounded setting in arrears rate is the RFR observed over a period (generally equivalent to the relevant IBOR
tenor) and compounded daily. The rate is adjusted whereby the observation period is backward-shifted to allow for therate to be known prior to the relevant payment date.

–

The five-year historical median approach to the spread adjustment is based on the median spot spread between the
IBOR and the term-adjusted RFR 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 be compounded itself).

Information about the relevant consultations and results, as well as test data and example calculations from Bloomberg, areavailable at ISDA Benchmark Reform and Transition from LIBOR webpage https://www.isda.org/2020/05/11/benchmarkreform-and-transition-from-libor/

41 ISDA IBOR Fallback Update

IBOR Fallbacks: Adjustments to Fallback Rates• Bloomberg will publish (i) the compounded setting in arrears rate, (2) the spread adjustment and (3) the ‘all in’
fallback rate on a daily basis• Publication will be on an indicative basis (i.e., ‘as if’ the fallbacks were triggered on the publication date)• Upon the occurrence of an ‘Index Cessation Event’ for the relevant IBOR, the spread adjustment will be fixed (but theindicative compounded setting in arrears rate and ‘all in’ fallback rate will continue to change on a daily basis). Contracts
will continue to reference the relevant IBOR until the ‘Index Cessation Effective Date’ occurs.
• Upon the occurrence of an ‘Index Cessation Effective Date’ for the relevant IBOR, contracts that continue to reference therelevant IBOR will reference the ‘all in’ fallback rate (which will include the spread adjustment that was set on the date ofthe ‘Index Cessation Event’ but with a changing compounded setting in arrears rate).

• Rulebook for final methodology published April 22, 2020. Available at
http://assets.isda.org/media/34b2ba47/c5347611-pdf/.
• FAQs (to be updated from time-to-time) available at http://assets.isda.org/media/ddcb20e0/76dd3ab8-pdf/

ISDA IBORIBORFallback
FallbackUpdate
Update42 ISDAIBOR Fallbacks: Key Dates
Bloomberg begins publication of indicative fallback rates via:
• Bloomberg Terminal• Bloomberg Data License• Bloomberg’s LIBOR Transition website (on a delayed basis)

Live as of July 17th

Launch of IBOR Fallback Supplement and IBOR Fallback Protocol

September 2020 (or later date after receive positive Business
Review Letter from the US DoJ and similar comfort from otherrelevant competition law authorities), with 2-4 weeks’ notice of
launch date

Effectiveness of IBOR Fallback Supplement and IBOR Fallback
ProtocolLate 2020 (or 2-4 months after publication)

43 ISDA IBOR Fallback Update

IBOR Fallback Protocol: Adherence in Escrow
22 July – ISDA’s Letter to National RFR WGs – ISDA IBOR Fallback Protocol• ISDA will provide market participants with approximately 2-4 weeks’ notice of the official launch date and later effective date.
• During this 2-4 weeks period, ISDA expects to facilitate a process whereby regulated entities and other key market participants
can adhere to the IBOR Fallback Protocol ‘in escrow’ prior to the launch date.
• This adherence will be binding and complete but the adhering entity’s name and information will not appear on the ISDA website
until the official launch date (and the adherence letter will be ‘deemed’ delivered as of that launch date, not the earlier date on
which it was submitted ‘in escrow’).
• Entities that adhere in escrow will do so via a private link that ISDA sends them. This link will take them to a page with the text of
the IBOR Fallback Protocol and all related information, including full adherence mechanics. The final text of the IBOR Fallback
Supplement and the IBOR Fallback Protocol will be available on www.isda.org during this time but the information in the private
link (e.g., adherence mechanics, list of adherents) will not be publicly available.
• Wide take up of this ‘adherence in escrow’ process will result in a broad and comprehensive list of adherents at the time the IBOR
Fallback Protocol launches and thereby indicate to the market an expectation of wide usage of the new fallbacks.
• RFR Working Groups in the UK, the US, the EU, Switzerland, Canada, Japan and Singapore have sent messages encouraging
dealers and other firms with significant derivatives exposure to adhere to the protocol during the escrow period in order topromote adoption.

44 ISDAISDA IBORIBORFallback
FallbackUpdate
UpdateIBOR Fallbacks: Other Templates and Materials• ‘Short form’ language for bilaterally incorporating the terms of the ISDA IBOR Fallbacks Protocol into agreements
on a wholesale basis for purposes of bilateral adherence• ‘Long form’ language setting out the language from the Attachment to the ISDA IBOR Fallbacks Protocol in full for
purposes of bilateral adherence• Template acknowledgment language for transactions entered into prior to publication of the IBOR Fallbacks
Protocol• Template wording for inclusion in (i) confirmations for new transactions or (ii) amendments to legacy transactions(on a counterparty-by-counterparty or transaction-by-transaction basis) between counterparties who adhered to
the IBOR Fallbacks Protocol and/or bilaterally adopted the terms of the IBOR Fallback Protocols using either ‘shortform’ or ‘long form’ language
•
•
•
•
•

Exclude transactions and agree to different fallbacks (e.g., to ‘perfectly match’ hedges)
Include enhanced Calculation Agent dispute provisions
Include additional documents and/or transactions
Exclude the pre-cessation fallbacks for LIBOR
Other templates as required/requested• Potential supplemental amendments to fallbacks for non-linear derivatives (e.g., in arrears swaps, caps/floors,
swaptions) – currently seeking feedback on approaches
45 ISDAISDA IBORIBORFallback
FallbackUpdate
UpdateCCPs – Transition to €STR and SOFR Discounting€STR> CCPs to switch discounting on all EUR-denominatedproducts from EONIA to €STR flat.
> CCP Transition Date: 24 July 2020.
> CCPs to apply cash compensation payments to all
accounts containing open EUR-denominated positions
on the transition date.

ISDA IBORIBORFallback
FallbackUpdate
Update46 ISDASOFR> CCPs to switch discounting on all USD-denominatedproducts from Fed Funds to SOFR.
> CCP Transition Date: 16 October 2020 *> CCPs to offer a combination of cash compensation (inrespect of valuation change) and swap compensation(in respect of risk profile change) to all accounts
containing open USD-denominated positions on thetransition date.
> At certain CCPs, including LCH, client accounts will beable to elect for cash-only compensation, in lieu ofswap compensation.
> An auction process will be used to close out unwanted
compensating swaps and provide a reference for cash
compensation calculations.
*subject to regulatory approval

ISDA Collateral Agreement Interest Rate Definitions> ISDA has published the Collateral Agreement Interest Rate Definitions.
> Incorporation of these into ISDA collateral agreements will enable parties to include standardised definitions (including
triggers and fallbacks) relating to overnight interest rates.
> The triggers and fallbacks are designed to mirror those used in derivative transactions which reference the relevant
overnight interest rates included in the Definitions.

> The first version contains collateral rate definitions of EONIA (Collateral Rate) and EuroSTR (Collateral Rate). Subsequentversions to contain SOFR (Collateral Rate) and other RFR definitions.
> Parties can:> (i) incorporate the most recent version of the Definitions prior to entry into the relevant agreement, or> (ii) incorporate the Definitions as amended from time to time, and elect to apply Interest Rate Override. Option to
override the definition of either a specified interest rate benchmark (eg Interest Rate Override (EONIA)), or all
benchmarks (Interest Rate Override (All Rates)), already included in the relevant agreement with the definition of thatinterest rate benchmark from the Collateral Definitions.

ISDA IBORIBORFallback
FallbackUpdate
Update47 ISDAISDA’s 2018 IBOR Global Benchmark Transition Report – Steps Market
Participants Can Take to Prepare for Transition
Assessment of IBOR Exposures

Assess Impact of Permanent Cessation•

Inventory of products linked to IBORs•

Review existing contracts and assess fallbacks•

Dynamic quantification of net and gross exposure on and offbalance sheet•

Determine re-papering/client outreach•Engage with industry working groups to enhance fallbacks

Calculate roll-off profiles ahead of 2019, 2020, 2021•

Mobilize efforts to implement fallbacks•

Transition Route Map

Mobilization of an IBOR Transition Program•

Contribute to demand for, design of and trading in new RFR
products•

Allocate responsibility to senior executive•

Federate governance structure•

Review relevant RFR WG publications, roadmaps etc•

Budget & resourcing•

Apply to participate in RFR WGs•

Project objectives•

Determine required infrastructure and process changes•

Stakeholder education•

Develop an implementation route map of key projects,
milestones and ownership

LIBOR Transition
ISDAPath
IBORForward
Fallbackfor
Update48 The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/

49 ISDA IBOR Fallback Update

Co-hosts

Lead Sponsor

Endorsers

50

International Capital Market Association

ICMA

51

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

52 52

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

53 53

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 is unlikely to be aligned with the commercial intention of the counterparties at the time of
the transaction

54 54

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

55 55

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):• A ‘Tough Legacy Task Force’ in the UK recommended that the UK Government consider
legislation in May• In June, the UK Government said that it would propose an amendment to the UK’s
benchmark legislation to strengthen the FCA’s powers• The FCA would be empowered to direct LIBOR’s administrator to change the methodology
for LIBOR in certain circumstances (so-called “synthetic LIBOR”)• Some details still to be worked through, including scope of the powers, 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

56 56

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

57 57

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 European Commission is currently inviting feedback on the proposal until 6 October, after which more clarity
should emerge on its scope and interaction with the US and UK proposals

58 58

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)

59 59

Co-hosts

Lead Sponsor

Endorsers

60

IBOR TRANSITION - LOANS
Pranav Sharma
September 22, 2020

Cyril Amarchand Mangaldas

Character, Competence & Commitment

The journey so far.

62

IBOR Transition• Announcement in July 2017 that LIBOR may not be available
after 2021 – need to transition to risk free rate (RFR) or
alternative reference rate for relevant currency• Current recommendation is to use RFR - SOFR for USD and
SONIA for £; EURIBOR for EUR may continue unchanged• Working Group for £RFR recommended that new loans afterQ3 2020 contain pre-agreed conversion terms• Exposure draft incorporating rate switch provisions released by
LMA earlier this month – not a recommended form
• Based on £RFR Working Group Conventions but recognizes
absence of “established market or operational practice”• £RFR Working Group Conventions have been applied across all
currencies – and not only £Privileged & Confidential
63

IBOR Transition• US Alternative Reference Rates Committee has released separate
conventions for SOFR in July 2020
• Switch over to RFR occurs either on a specified date or on a
trigger event (intended to be objective e.g. public announcement
by a regulator)• Based on daily compounding RFR for relevant period in arrears
and five days lookback without observation shift• Interest calculated as per existing term rate until switch over – if
this occurs in the middle of an interest period• Assumes there is no change in margin at switch – but allows
parties to agree to credit adjustment spread
Privileged & Confidential
64

ECB Policy.

65

ECB Policy• All-in-cost construct has to be revised – currently, benchmark rate definition refers to
LIBOR or any other IBOR
• Query if the caps need to be/will be revised?
• Consent of AD category 1 bank
• Refinancing of ECBs – condition that new ECB must be cheaper than the old one

Privileged & Confidential
66Transition – issues and likely challenges.

67Issues and likely challenges••••

Break Costs
Market Disruption
Prepayments
Certain existing facility agreements will have to be amended or refinanced
–
–
–
–
–

consent threshold to be considered – all lenders?
other than lenders, who all need to consent? Guarantor? ECA?
impact on guarantees and security documents?
impact on hedging arrangements?
operational matters – corporate authorisations? Stamping and registration?

Privileged & Confidential
68Issues and likely challenges• Switch from look-forward to look-back rates could impact certain aspects of lendingtransactions• Trust & retention account or escrow agreements• Sponsor support or other arrangements to support cash flows in structured lendingtransactions• Amendments likely to require lenders’ consents – especially in more complex funding
structures• Loans raised by offshore subsidiaries or JVs of Indian companies - impact on guarantee
given by the Indian company?
• Deal execution may take longer given current levels of market awareness – impact ontimelines for new transactions
Privileged & Confidential69

Co-hosts

Lead Sponsor

Endorsers

70

Data and Infrastructure Preparedness:
Practical Challenges of IBOR Transition:

Rohit Mandhotra
Risk Workflow Specialist
Bloomberg L.P.

71

LIBOR Transition
Data and Infrastructure Viewpoint
Rohit Mandhotra
Risk Workflow Specialist
South Asia, Bloomberg L.P.
rmandhotra8@bloomberg.net
22th September, 2020

The clock is already ticking…
• Modified MIFOR
discussions

Q4

2020
Q3

• Cessation

Q2

2021
Q1

• Finalization of
Modified MIFOR• Publication

73• Systems Upgradation• Customer Outreach

Q3-Q4• Transition of Legacy
Contracts

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
•
•
•
•

74

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 “Modified MIFOR/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.

75Planning for Transition76Impact Assessment – Where to Begin

77

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 Traded78

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•

79

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

Summary: Benchmark Transition
1. Data

Fallback data forderivatives &cash fallback
language

2. Infrastructure.
Inventory &Systems

3. Communication

80

Cessation
scenarios andimpact analysis

Strategy basedon assessmentof legal andoperational
options

Modified MIFOR
curve and term
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

Endorsers

82

Banking Panel on Implementation/Conduct Issues:

Saurabh Chhabra
Co-head, Corporate Sales &SolutionsCiti South Asia

Utkarsh Sharma
Head of Foreign Exchange andDerivative Trading
Deutsche Bank, India

Parul Mittal Sinha
Managing Director - Head ofFinancial Market Trading,India and South Asia
Standard Chartered Bank

83

Utkarsh Sharma
Head of Foreign Exchange andDerivative Trading
Deutsche Bank, India

84

Co-hosts

Lead Sponsor

Endorsers

85

Closing Remarks:

Aniket Patni
Regional Proposition Sales Director
Refinitiv

86

LIBOR Transition<500 days to Dec 2021

22 Sep, 2020

Ever Evolving content for LIBOR Transition<IBOR> Transition App in Eikon
OIS (Underlying based on RFR rate)
Currency

IBOR
Instrument

RFR
Instrument

RFR
Instrument
Code

RFR
Publication
time (Local)

08:00
EST/EDT

Example Fallback
RIC

Refinitiv
Composite

Specialist

OIS Zero curve

Term Rates

USDSROIS=TWEB, RCM, 0#USDSROISZ=TRDL, SX, TPSR, TRHKR

Futures.SOFR,
SOFR1MAVG=,SOFR3MAVG=,SOFR6MAVG=

0#S1R: ,0#SRA:.SONIA

0#SON:.SAR1MC,.SAR3MC,.SAR6MC0#SARON:

USD

LIBOR USDSOFRUSDSOFR=

GBP

LIBOR GBP

SONIA

SONIAOSR=

09:00 London
GBPONFSRF=ISDATime

GBPOIS=GBPOIS=ICAP, TTKL,TWEB, TRDL, MBGL

0#GBPOISZ=R

CHF

LIBOR CHF

SARON

SARON.S

18:00 CETCHFSNFSRF=ISDACHFOIS=CHFOIS=ICAP, BGCP,
TWMK,

0#CHFOISZ=R

JPY

LIBOR JPYTONA

JPONMU=RR

10:00 JSTJPYSNFSRF=ISDAJPYOIS=JPYOIS=ICAP, SMKR,
YMPR, TKFX

0#JPYOISZ=R

AUD

BBSW

RBA CashRate

AUCASH=RB
AA

09:00
AEST/AEDTAU1MBAF=ISDAAUDOIS=

AUDOIS=ICAA, SMKR,
TTKA, BGCP, FMD

0#AUDOISZ=R

CAD

CDOR

CORRA

CORRA=

09:00 ET

CA1MBAFIXF=ISDACADOIS=CADOIS=ICAP, SMKR,
FMD, GCMN, TRDL

0#CADOISZ=R

0#CRA:EUREURIBOR€STREUROSTR=

08:00 CETEURIBORSWDF=ISDAEURESTOIS=EURESTOIS=ICAP, TRDL, 0#EURESTOISZ
BGCP, TPEU
=R

0#EON:

HKD

HIBOR

HONIA

HONIA=

17:00 Hong
Kong Time

HIHKDONDF=ISDAHKDOIS=

88

USDONFSRF=ISDA

CompoundIndex

HKDOIS=TRHK, PREA,NITCGBPTRR=RFTB

JPYTRR=

Solutions for Loan/Bond markets
Compounding Approaches, until term structure for RFR evolves•

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•

Standard Shift is 5 business days•

SOFR-referenced Floating Notes•

SONIA/SORA-referenced Floating
Notes

•

Similar to OIS market conventions

Interest Period

Interest Period

Interest Period
Shift

Observation Period
Rate Freeze
89

Payment Date

Observation Period

Observation PeriodLag

Solutions for derivatives
Price new RFR based derivatives and quantify the impact of transition
Use new RFR OIS Zero Coupon based Curves in Calculators

Click the Curves in Zero
Curve and change to OISSOFR (USD), €STR (EUR)
or SONIA (GBP)90

A big thank you to all the speakers,
panelists and participants today ,please wait for Q&A
91

Q&A

92

Thank you for attending!
We hope to see you at our next event:ASIFMA Virtual Event: Evolving Cyber Landscapein Light of COVID-19 – Managing the Impact
Tuesday, 13 October 2020
11:00AM – 12:15PM (HKT/SIN)

www.asifma.org/events
93Tan Yeow Seng
Chief Cybersecurity Officer
Monetary Authority of Singapore
Brian Hansen
Executive Director, Asia PacificFinancial Services ISAC

… and more speakers to be confirmed
www.asifma.org/events94