Friday, 07 August 2020

ASIFMA produces industry guide for IBOR transition in Asia

Asia Securities Industry & Financial Markets Association (ASIFMA) published an interbank offered rate (IBOR) Transition Guide for Asia. The guide was co-produced with three other trade associations, The Asia Pacific Loan Market Association, International Capital Market Association and International Swaps and Derivatives Association, and co-authored by member firms Deloitte and Morgan Lewis.

The IBOR Transition Guide for Asia provides an overview of key implementation issues that Asian financial institutions (FIs) should consider in preparing to transition from the London Interbank Offered Rate (LIBOR) in all its tenors and currencies to Alternative Reference Rates (ARRs) by the end of 2021 (LIBOR Transition). Specifically, it includes a practical implementation checklist for FIs to use as a reference.

“It is more important than ever for FIs to ensure they are fully prepared for LIBOR Transition. Market disruption caused by COVID-19 may have inevitably caused focus to move away at this critical time. The Financial Conduct Authority (FCA) has reiterated that the deadline will not be extended,” Rebecca Weinrauch, Executive Director and Head of Fixed Income at ASIFMA, said.

The benchmark is widely used in a variety of loans and financial instruments, including consumer and syndicated loans, structured products, securitisations, short-term instruments and bonds, such as floating rate notes, over-the-counter derivatives and exchange-traded derivatives, as well as in corporate contracts, accounting, tax and valuation methods. In order to achieve the FCA's target of replacing LIBOR, ARRs have been identified for each of the five LIBOR currencies.

“The potential consequences that may arise if market participants do not prepare for the transition away from LIBOR are far reaching,” Weinrauch continued. “We hope this guide, which has been specifically produced to reflect the challenges faced by participants in the Asian Markets, can be used by FIs in the region to step up the move to ARRs.”

Drawing upon a combination of practical experience from organisations that have initiated transition programmes, as well as emerging guidance from the regulatory community, FIs can make reference to the practical implementation checklist outlined in the guide when performing their own assessment of the impact from benchmark rate reforms.

Re-disseminated by The Asian Banker