Voting Draft for September 9, 2019 Market Risk Advisory Committee (MRAC) Meeting

MRAC Subcommittee on Interest Rate Benchmark Reform Recommendation for MRAC Approval 

1

 “Plain English” Disclosures for New Derivatives Referencing LIBOR and other IBORs1

Select the appropriate disclosure below based on (1) whether you are entering a transaction based on 

LIBOR or a different IBOR (as used herein, in addition to LIBOR, the “IBORs” include EURIBOR, TIBOR, 

Euroyen TIBOR, BBSW, HIBOR and CDOR) and (2) whether you are entering the transaction prior to 

implementation of new fallbacks in the 2006 ISDA Definitions or after implementation of such 

fallbacks.

1. For LIBOR Transactions:

a. For Use Prior to Implementation of New Fallbacks in 2006 ISDA Definitions2

:

It is uncertain whether [USD/GBP/JPY/CHF/EUR]3 LIBOR will continue to be produced and published 

after the end of 2021. If [USD/GBP/JPY/CHF/EUR]4 LIBOR is discontinued during the term of this 

financial instrument, the contractual terms would provide a process for determining a fallback but it is 

unclear and uncertain what rate this instrument would reference as a result of that process. As a result

of this lack of clarity and certainty, there is no way to know at this time whether you would be 

disadvantaged economically. Timing for any discontinuation of LIBOR may vary across different 

currencies and tenors in which LIBOR is currently produced and such timing may differ from the timing 

for any discontinuation of other interbank offered rates (IBORs). In addition, the discontinuation of 

LIBOR may result in a mismatch between the rate referenced in this financial instrument and your other 

financial instruments, including potentially those that are intended as hedges. 

The International Swaps and Derivatives Association, Inc. (ISDA) intends to update its definitions to 

include fallbacks to certain rates that would take effect and provide certainty if LIBOR or another key 

IBOR is permanently discontinued. It is expected that [USD/GBP/JPY/CHF/EUR]5 LIBOR will fall back to 

an adjusted version of [SOFR/SONIA/TONA/SARON/€STR]6

. In order to avoid the lack of clarity regarding 

the rate that this contract would reference upon the discontinuation of [USD/GBP/JPY/CHF/EUR] 7

LIBOR, you should consider either adhering to the protocol that ISDA will publish to include the new 

fallbacks in existing derivative contracts such as this contract or bilaterally amending such derivative 

contracts to include the new fallbacks. Adherence to the ISDA protocol will amend contracts with other 

adhering parties so that such contracts include the fallbacks but will not result in inclusion of the 

fallbacks in contracts with counterparties that do not adhere. The ISDA protocol will provide for 

standard amendments to include the new fallbacks but bilateral amendments could be used to amend 

contracts with all counterparties that agree to the bilateral amendments on terms that are mutually 

agreeable to the relevant counterparties. 

 1 As used herein, the IBORs include LIBOR in all five currencies (USD, GBP, JPY, CHF, EUR), EURIBOR, TIBOR, 

Euroyen TIBOR, BBSW, HIBOR and CDOR. 2 ISDA expects that amended and restated definitions for LIBOR and the other IBORs covered by this disclosure to 

take effect sometime in 2020.

3 Drafting note: Select the LIBOR currency for the relevant transaction. 4 Drafting note: Select the LIBOR currency for the relevant transaction. 5 Drafting note: Select the LIBOR currency for the relevant transaction. 6 Drafting note: Select: SOFR if the transaction references USD LIBOR; SONIA if the transaction references GBP 

LIBOR; TONA if the transaction references JPY LIBOR; SARON if the transaction references CHF LIBOR; €STR if the 

transaction references EUR LIBOR.

7 Drafting note: Select the LIBOR currency for the relevant transaction.
Voting Draft for September 9, 2019 Market Risk Advisory Committee (MRAC) Meeting

MRAC Subcommittee on Interest Rate Benchmark Reform Recommendation for MRAC Approval 

2

Even after ISDA implements fallbacks in its definitions, the discontinuation of LIBOR and the application 

of the fallbacks in ISDA’s definitions may result in a mismatch between the rate referenced in this 

financial instrument and your other financial instruments, including potentially those that are intended 

as hedges. You should review the terms of this instrument and your other financial instruments to 

determine if adhering to the protocol published by ISDA or entering into appropriate bilateral 

amendments will meet your hedging objectives. You should also consider the tax, accounting and 

regulatory implications of executing and then potentially amending this instrument. 

For more information on benchmark reform related to LIBOR and other IBORs, as well as specific 

information about the relevant rates, see [link to database].

b. For Use After Implementation of New Fallbacks in 2006 ISDA Definitions:

It is uncertain whether [USD/GBP/JPY/CHF/EUR] 8 LIBOR will continue to be produced and published 

after the end of 2021. If LIBOR is discontinued during the term of this financial instrument, this 

instrument would reference an adjusted version of [SOFR/SONIA/TONA/SARON/€STR] 9

, a rate that is 

inherently different from LIBOR. As a result, payments would be calculated differently and you may be 

disadvantaged economically. LIBOR is a forward looking term rate that is meant to represent a bank’s 

cost of funding over various tenors, whereas [SOFR/SONIA/TONA/SARON/€STR]10 is an overnight nearlyrisk free rate and the relevant adjustments will not perfectly account for these differences on an 

ongoing basis. Timing for any discontinuation of LIBOR may vary across different currencies and tenors 

in which LIBOR is currently produced and such timing may differ from the timing for any discontinuation 

of other interbank offered rates (IBORs). In addition, the discontinuation of LIBOR may result in a 

mismatch between the rate referenced in this financial instrument and your other financial instruments, 

including potentially those that are intended as hedges (even if the hedged instruments contain updated 

fallback provisions, unless those provisions are based on the fallbacks in the 2006 ISDA Definitions). 

For more information on benchmark reform related to LIBOR and other IBORs, as well as information 

specific about the relevant rates, see [link to database].

2. For Other IBOR Transactions:

a. For Use Prior to Implementation of New Fallbacks in 2006 ISDA Definitions11:

While there is not currently an expectation that [EURIBOR/TIBOR/Euroyen 

TIBOR/BBSW/HIBOR/CDOR]12 will be discontinued, there is no guarantee that it will continue to be 

produced and published for the entire term of this financial instrument. If [EURIBOR/TIBOR/Euroyen 

 8 Drafting note: Select the LIBOR currency for the relevant transaction. 9 Drafting note: Select: SOFR if the transaction references USD LIBOR; SONIA if the transaction references GBP 

LIBOR; TONA if the transaction references JPY LIBOR; SARON if the transaction references CHF LIBOR; €STR if the 

transaction references EUR LIBOR. 10 Drafting note: Select: SOFR if the transaction references USD LIBOR; SONIA if the transaction references GBP 

LIBOR; TONA if the transaction references JPY LIBOR; SARON if the transaction references CHF LIBOR; €STR if the 

transaction references EUR LIBOR. 11 ISDA expects that amended and restated definitions for LIBOR and the other IBORs covered by this disclosure to 

take effect sometime in 2020.

12 Drafting note: Select the IBOR for the relevant transaction.
Voting Draft for September 9, 2019 Market Risk Advisory Committee (MRAC) Meeting

MRAC Subcommittee on Interest Rate Benchmark Reform Recommendation for MRAC Approval 

3

TIBOR/BBSW/HIBOR/CDOR]13 is discontinued during the term of this financial instrument, the 

contractual terms would provide a process for determining a fallback but it is unclear and uncertain

what rate this instrument would reference as a result of that process. As a result of this lack of clarity 

and certainty, there is no way to know at this time whether you would be disadvantaged economically. 

Timing for any discontinuation of [EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR]14 may differ 

from the timing for any discontinuation of other interbank offered rates (IBORs) such as LIBOR. In 

addition, the discontinuation of [EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR]15 may result in a 

mismatch between the rate referenced in this financial instrument and your other financial instruments, 

including potentially those that are intended as hedges. 

The International Swaps and Derivatives Association, Inc. (ISDA) intends to update its definitions to 

include fallbacks to certain rates that would take effect and provide certainty if 

[EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR]16, LIBOR or another key IBOR is permanently 

discontinued. It is expected that [EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR]17 will fall back 

to an adjusted version of [€STR/TONA/AONIA/HONIA/CORRA]

18. In order to avoid the lack of clarity 

regarding the rate that this contract would reference upon the discontinuation of 

[EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR]19, you should consider either adhering to the 

protocol that ISDA will publish to include the new fallbacks in existing derivative contracts such as this 

contract or bilaterally amending such derivative contracts to include the new fallbacks. Adherence to 

the ISDA protocol will amend contracts with other adhering parties so that such contracts include the 

fallbacks but will not result in inclusion of the fallbacks in contracts with counterparties that do not 

adhere. The ISDA protocol will provide for standard amendments to include the new fallbacks but 

bilateral amendments could be used to amend contracts with all counterparties that agree to the 

bilateral amendments on terms that are mutually agreeable to the relevant counterparties.

Even after ISDA implements fallbacks in its definitions, the discontinuation of [EURIBOR/TIBOR/Euroyen 

TIBOR/BBSW/HIBOR/CDOR]20 and the application of the fallbacks in ISDA’s definitions may result in a 

mismatch between the rate referenced in this financial instrument and your other financial instruments, 

including potentially those that are intended as hedges. You should review the terms of this instrument 

and your other financial instruments to determine if adhering to the protocol published by ISDA or 

entering into appropriate bilateral amendments will meet your hedging objectives. You should also 

consider the tax, accounting and regulatory implications of executing and then potentially amending this 

instrument.

 13 Drafting note: Select the IBOR for the relevant transaction. 14 Drafting note: Select the IBOR for the relevant transaction. 15 Drafting note: Select the IBOR for the relevant transaction. 16 Drafting note: Select the IBOR for the relevant transaction. 17 Drafting note: Select the IBOR for the relevant transaction. 18 Drafting Note: Select €STR if the transaction references EURIBOR; TONA if the transaction references TIBOR or 

Euroyen TIBOR; AONIA if the transaction references BBSW; HONIA if the transaction references HIBOR; CORRA if 

the transaction references CDOR.

19 Drafting note: Select the IBOR for the relevant transaction. 20 Drafting note: Select the IBOR for the relevant transaction.
Voting Draft for September 9, 2019 Market Risk Advisory Committee (MRAC) Meeting

MRAC Subcommittee on Interest Rate Benchmark Reform Recommendation for MRAC Approval 

4

For more information on benchmark reform related to [EURIBOR/TIBOR/Euroyen 

TIBOR/BBSW/HIBOR/CDOR]21, LIBOR and other IBORs, as well as specific information about the relevant 

rates, see [link to database].

b. For Use After Implementation of New Fallbacks in 2006 ISDA Definitions:

While there is not currently an expectation that [EURIBOR/TIBOR/Euroyen

TIBOR/BBSW/HIBOR/CDOR]22 will be discontinued, there is no guarantee that it will continue to be 

produced and published for the entire term of this financial instrument. If [EURIBOR/TIBOR/Euroyen 

TIBOR/BBSW/HIBOR/CDOR]23 is discontinued during the term of this financial instrument, this 

instrument would reference an adjusted version of [€STR/TONA/AONIA/HONIA/CORRA]24, a rate that is 

inherently different from EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR]25. As a result, payments 

would be calculated differently and you may be disadvantaged economically. EURIBOR/TIBOR/Euroyen 

TIBOR/BBSW/HIBOR/CDOR]26 is a forward looking term rate that is meant to represent a bank’s cost of 

funding over various tenors, whereas [€STR/TONA/AONIA/HONIA/CORRA]27 is an overnight nearly-risk 

free rate and the relevant adjustments will not perfectly account for these differences on an ongoing 

basis. Timing for any discontinuation of [EURIBOR/TIBOR/Euroyen TIBOR/BBSW/HIBOR/CDOR] 28 may 

differ from the timing for any discontinuation of other interbank offered rates (IBORs) such as LIBOR. In 

addition, the discontinuation of LIBOR may result in a mismatch between the rate referenced in this 

financial instrument and your other financial instruments, including potentially those that are intended 

as hedges (even if the hedged instruments contain updated fallback provisions, unless those provisions 

are based on the fallbacks in the 2006 ISDA Definitions). 

For more information on benchmark reform related to EURIBOR/TIBOR/Euroyen 

TIBOR/BBSW/HIBOR/CDOR]29, LIBOR and other IBORs, as well as specific information about the relevant 

rates, see [link to database].

 21 Drafting note: Select the IBOR for the relevant transaction. 22 Drafting note: Select the IBOR for the relevant transaction. 23 Drafting note: Select the IBOR for the relevant transaction. 24 Drafting Note: Select €STR if the transaction references EURIBOR; TONA if the transaction references TIBOR or 

Euroyen TIBOR; AONIA if the transaction references BBSW; HONIA if the transaction references HIBOR; CORRA if 

the transaction references CDOR.

25 Drafting note: Select the IBOR for the relevant transaction. 26 Drafting note: Select the IBOR for the relevant transaction. 27 Drafting Note: Select €STR if the transaction references EURIBOR; TONA if the transaction references TIBOR or 

Euroyen TIBOR; AONIA if the transaction references BBSW; HONIA if the transaction references HIBOR; CORRA if 

the transaction references CDOR.

28 Drafting note: Select the IBOR for the relevant transaction. 29 Drafting note: Select the IBOR for the relevant transaction.