LIBOR fallbacks meaning

This Checklist This Checklist presents, in a tabular format, the matters to address when preparing a loan that references a compounded risk-free rate (RFR) such as the Sterling Overnight Interbank Average Rate (SONIA), calculated in arrears. It explains the purpose of the key provisions, highlights issues to weigh up, and offers drafting pointers and practical guidance for practitioners. For further analysis, see Practice Note: Interest provisions in risk-free rate based loan agreements. The Checklist draws on provisions contained in the Multicurrency Term and Revolving Facilities Agreement incorporating backward-looking compound rates and forward looking term rates (lookback without observation shift) issued by the LMA (the LMA Compounded RFR Facilities Agreement). The LMA’s recommended form documentation, with accompanying user guides and commentary, is accessible to LMA members on its website. While the Checklist is prepared on the basis of LMA-style documentation, the guidance will also be relevant to bilateral transactions and agreements using other loan forms. Practice Note: Interest provisions in risk-free rate based loan agreements provides a fuller discussion and...

In this issue: Sustainable finance and ESG weekly round-up Moveable Transactions (Scotland) Act 2023 Football Governance Bill LIBOR and benchmarks Sustainable finance Debt capital markets Derivatives Regulation for derivatives lawyers Technology in banking & finance transactions Structured products and securitisation Regulation for banking lawyers Banking & Finance Highlights 2024/2025 Daily and weekly news alerts New and updated content Useful information Sustainable finance and ESG weekly round-up For this week’s coverage of Sustainable finance and ESG developments, please see: Sustainable finance and ESG weekly round–up—19 December 2024. Moveable Transactions (Scotland) Act 2023 Moveable Transactions (Scotland) Act 2023 (Commencement) Regulations 2024 SSI 2024/378: From 1 April 2025, the outstanding provisions of the Moveable Transactions (Scotland) Act 2023 (the Act) will come into effect. See: LNB News 17/12/2024 9. Moveable Transactions (Forms) (Scotland) Regulations 2024 SSI 2024/379: These prescribe the forms to be used for the purposes set out...

In this issue: LIBOR and benchmarks Lending Security Sustainable finance Real estate finance Debt capital markets Derivatives Regulation for banking lawyers Sanctions Daily and weekly news alerts New and updated content Useful information LIBOR and benchmarks LMA publishes recommended forms for euro exposure drafts with EURIBOR fallbacks The Loan Market Association (LMA) has issued recommended-form versions of single-currency euro exposure drafts that embed €STR-based fallbacks. The templates include the International Swaps and Derivatives Association (ISDA)/Bloomberg EURIBOR-€STR Spread Adjustment, streamlined temporary fallbacks, and drafting for Central Bank Rate Adjustment. The LMA has also updated its Users Guide to explain the two-tier waterfall framework, how the reference rates clause operates, and the requirements for Italian law compliance. These updates will apply across all LMA documentation that references euros. See: LNB News 03/07/2025 55. Source: LMA—Documents & Guidelines alerts archive. Lending Ciddy Ltd v Natalia [2025] EWHC 1616 (Ch). The Chancery Division...

Standard Chartered plc v Guaranty Nominees Ltd and other companies [2024] EWHC 2605 (Comm) What are the practical implications of this case? In a notable ruling for the banking and finance sector, the High Court implied a term into an offering circular for preference shares, providing that a ‘reasonable alternative rate’ would apply after the cessation of USD LIBOR. The circular had linked dividends to three‑month USD LIBOR. Although it set out fallbacks for occasions when LIBOR was not published, those provisions proved unworkable once LIBOR ceased entirely. The court then addressed what the reasonable alternative ought to be, determining that CME Term SOFR together with the International Swaps and Derivatives Association (ISDA) Spread Adjustment—i.e., the rate published as synthetic USD LIBOR prior to 1 October 2024—was the most suitable rate on the facts. While the dispute focused on calculating dividend rates for preference shares, the decision is of broader interest to the finance market...

ARCHIVED : This Practice Note has been archived and is not maintained . This Practice Note serves as a launch point to help firms plan and carry out a London Interbank Offered Rate (LIBOR) transition project. It sets out the FCA’s part in the LIBOR switch and how it is supporting firms’ preparations, then examines in greater depth the principal issues raised by UK regulators. This is followed by a checklist highlighting key LIBOR impact areas that firms must review and address, together with points to weigh when doing so. It should be treated as a foundation and read in the context of each firm’s operations and LIBOR exposures, and tailored and adjusted accordingly. Practice Note: LIBOR transition [Archived] offers a broader outline of the matters around LIBOR transition, plus explanations of commonly used terms. The LIBOR developments tracker summarises developments linked to moving from LIBOR to risk-free rates. It covers each LIBOR currency: Sterling US dollars Swiss Francs Japanese Yen Euros...

ARCHIVED: This Practice Note has been archived and is not maintained. This archived Practice Note is no longer updated. It outlines the Loan Market Association (LMA)’s method for calculating interest in its LIBOR-based facility documentation. It reviews the interest calculation clause—covering margin, the London Interbank Offered Rate (LIBOR), the Euro Interbank Offered Rate (EURIBOR) or another benchmark, plus mandatory costs—before concentrating on how the benchmark rate (such as LIBOR) is derived. How LMA documents define and compute LIBOR, EURIBOR or an alternative benchmark, including calculation of the Screen Rate—see Definition of LIBOR, EURIBOR and Benchmark Rate in LMA documents and Definition of Screen Rate in LMA documents Drafting implications of ICE Benchmark Administration Limited assuming responsibility for administering LIBOR Drafting effects of the ICE LIBOR Error Policy and the Euribor Intraday Refixing Policy, which set out refixing and republication of LIBOR and EURIBOR respectively—see Intra-day correction, recalculation or republication of a Screen Rate The fallback waterfall where the Screen Rate is unavailable for...

What does this Practice Note cover? Inflation derivatives serve as a key risk management tool, enabling participants to hedge effectively against fluctuations in inflation rates. The market is sizeable, well established and dates back to its earliest forms in the early 1980s. In 2014, the International Swaps and Derivatives Association (ISDA) estimated the global non‑cleared inflation derivatives market at around US$3tn. In recent years, pronounced volatility and rising inflation across several major regions, including the UK, have drawn renewed attention to these instruments. This Practice Note summarises: what inflation derivatives are who uses inflation derivatives documentation product types, and future developments What are inflation derivatives? An inflation derivative is a financial contract used to pass the risk, or the potential benefits, of movements in inflation from one counterparty to another. These instruments trade both over‑the‑counter (OTC) and on exchanges; this Practice Note focuses on the OTC market. Inflation‑linked payments under an inflation derivative are calculated by reference to...