On July 30, 2019, ISDA® published a statement of the preliminary results of its supplemental consultation on spread and term adjustments for benchmark fallbacks in derivatives contracts that reference certain interbank offered rates (IBORs), including USD LIBOR (see Legal Update, ISDA Publishes Two Consultations on IBOR Benchmark Fallbacks).

The statement announces that, based on the majority of responses received, ISDA expects to proceed with developing benchmark fallbacks for use in its standard definitions, the 2006 ISDA Definitions, based on a risk-free rate (RFR) adjusted by the following:

This approach is consistent with the results from a similar previous consultation relating to GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW conducted in 2018 (see Legal Update, ISDA Publishes Final Results of Benchmark Fallback Consultation).

However, ISDA notes that information included in the statement is subject to the final decision of the ISDA Board Benchmark Committee and, at this stage, only reflects its preliminary findings. ISDA hopes to publish its final decision on the spread and term adjustments for these benchmark fallbacks in August 2019.

For more information on benchmark reform and its impact on derivatives transactions, see Practice note, Interest Rate Benchmark Reform: Bond and Derivatives Markets.

For more help on benchmark reform, see LIBOR Replacement Toolkit.