The Lma's Recommended Forms of Facility Agreement for Loans

THE LMA’S RECOMMENDED FORMS OF FACILITY AGREEMENT FOR LOANS REFERENCING RISK-FREE RATES A Borrower’s Guide Produced for the Association of Corporate Treasurers by Slaughter and May This is an interactive document. You can navigate with the icons on the right. The contents menu below is also interactive. CONTENTS Introduction 4 4.1 UK RFRWG recommendations 21 Defined terms 6 4.2 Compounding calculation 21 PART I - LIBOR TRANSITION ESSENTIALS 8 4.3 Lookback period 22 1. Working Groups 8 4.4 Observation shift 22 1.1 A market-led effort 8 4.5 Interest rate floors 23 1.2 Cross-currency co-ordination 8 4.6 Recommendations of other national Working Groups 23 2. The transition timetable 9 5. Data sources 25 2.1 When will LIBOR cease to be published? 9 6. Credit adjustment spread (CAS) 27 2.2 “Pre-cessation” and synthetic LIBOR 11 6.1 Pricing of RFR loans 27 2.3 What does this mean for the availability of LIBOR loans? 12 6.2 How is the CAS to be calculated? 27 2.4 Considerations in relation to USD LIBOR loans 13 6.3 Screen rate CAS 28 2.5 What about non-LIBOR related “amend and extend” transactions? 13 6.4 The US approach 28 2.6 What about amending existing LIBOR loans? 14 7. The LMA RFR Templates 29 3. Replacement rates 16 7.1 The LMA’s LIBOR transition resources 29 3.1 Rate options 16 7.2 Recommended forms of facility agreement for RFR-linked loans 29 3.2 EURIBOR 18 7.3 Next steps 29 3.3 Term SONIA 18 8. Hedging considerations 30 3.4 Term SOFR 19 8.1 Active transition or transition by way of fallback 30 3.5 Other term RFRs 20 8.2 The ISDA IBOR Fallbacks 31 4. Conventions for referencing RFRs compounded in arrears in loans 21 9. Beyond LIBOR 32 THE LMA’S RECOMMENDED FORMS OF FACILITY AGREEMENT FOR LOANS REFERENCING RISK-FREE RATES 2 PART II – COMMENTARY ON THE RFR TERMS IN 5.1 Term Rate Currency fallbacks 47 THE COMPOUNDED/TERM MTR 34 5.2 Compounded Rate Currency fallbacks 48 1. Introduction 34 5.3 New definition of cost of funds 48 2. Interest provisions - overview 35 6. Market disruption 50 2.1 Calculation of interest 35 7. Prepayments 51 2.2 Reference Rate Terms 35 7.1 Break costs 51 2.3 Alterations to Reference Rate Terms 35 7.2 Voluntary prepayments 51 3. Interest on Compounded Rate Loans 37 8. Changes to the reference rates 52 3.1 NCCR vs CCR 37 Appendix to Part II - Compounding formulae 54 3.2 Length of lookback 38 PART III – FURTHER INFORMATION AND KEY CONTACTS 56 3.3 Observation shift or not 38 1. Further information 56 3.4 Business Days, Additional Business Days and RFR Banking Days 38 1.1 General 56 3.5 Day count conventions, interest calculation 1.2 Trade associations 56 and payment conventions 39 1.3 Data sources 56 3.6 Zero floors 40 1.4 GBP 56 3.7 Credit adjustment spread (CAS) 42 1.5 USD 57 3.8 Application of Sterling Loan Conventions 44 1.6 EUR 57 3.9 Interest periods 44 1.7 CHF 57 4. Rate switch for Term Rate Currencies 45 1.8 JPY 57 5. Fallbacks 47 2. Key Contacts 58 THE LMA’S RECOMMENDED FORMS OF FACILITY AGREEMENT FOR LOANS REFERENCING RISK-FREE RATES 3 Introduction Since the beginning of 2021, the volume of loans referencing risk-free rates The interest provisions of the LMA RFR Templates are quite complex in (RFRs) has increased sharply. Some borrowers have moved to RFR terms to comparison to LIBOR terms. Treasurers contemplating their first RFR-linked loan the exclusion of LIBOR terms. Others have opted for a “rate switch” might feel that the transition is akin to learning a new language. The terminology mechanism, meaning the facility converts from LIBOR terms to RFR terms is different, the conventions are different and there are multiple options, where automatically on a future date or the occurrence of specified triggers. The Loan previously there was a single route. It will take time for the vocabulary of RFRs Market Association (LMA) exposure draft RFR facility templates, updated last to become as entrenched and familiar as the lexicon of LIBOR. However, the November to reflect the recommended SONIA loan conventions developed by growing consensus on the best approach to RFR lending, including the the Working Group on Sterling Risk-Free Reference Rates (UK RFRWG), have emergence of the LMA RFR Templates, suggests that fluency should be easier played a key role in increasing the numbers of borrowers that are including RFR to attain than was the case for borrowers who worked with RFRs during 2020. terms in their loan facilities. This Guide aims to assist treasurers approaching the LMA RFR Templates for The LMA’s exposure draft RFR terms have been used in term and revolving the first time, whether in the course of raising new money, or as a result of the syndicated loans, both in sterling and in other currencies. They have also been need to amend existing LIBOR facilities that extend beyond the end of this year: adapted for bilateral loans. In most cases, the LMA’s framework drafting for RFRs has been adopted with fairly minimal adjustment, suggesting that lenders • Part I covers “LIBOR Transition Essentials”, a brief background to RFRs and are becoming broadly comfortable with the LMA’s approach. This enabled the the UK’s approach to LIBOR transition in the loan market, the UK RFRWG’s LMA to replace the exposure drafts with its first recommended forms of facility recommended conventions for referencing RFRs in loans and an overview of agreement for loans referencing RFRs (the LMA RFR Templates) on 30 March the LMA RFR Templates. 2021. The RFR terms reflected in the LMA RFR Templates will be rolled out • Part II is a commentary on the interest rate and related provisions of the across the LMA’s documentation library in due course. most comprehensive of the LMA RFR Templates, the LMA’s recommended The publication of the LMA RFR Templates is a significant development, given form of facility agreement for multi-currency facilities referencing RFRs and/ new LIBOR loans are anticipated to disappear entirely over the course of this or term rates (the Compounded/Term MTR). It explains the key provisions year. The UK RFRWG’s 31 March 2021 target for the cessation of new sterling of the Compounded/Term MTR and how the RFR terms differ from IBOR LIBOR loans has already passed, so for sterling borrowers, LIBOR is no longer terms. It also highlights the provisions of the Compounded/Term MTR that an option. The deadlines for the cessation of new LIBOR business in other borrowers might seek to adjust or negotiate. currencies are imminent. In the syndicated loan market, attainment of the • Part III contains links to sources of further information and contact details various Working Groups’ targets for the cessation of new LIBOR business is for the Association of Corporate Treasurers (ACT) and the Slaughter and heavily dependent on the availability of operationally workable and standardised May LIBOR transition teams. documentation terms. THE LMA’S RECOMMENDED FORMS OF FACILITY AGREEMENT FOR LOANS REFERENCING RISK-FREE RATES 4 The commentary in Part II has been prepared on the assumption that most corporates reading this Guide will not be LMA members and so will not have access to the LMA documentation library. The key provisions are therefore summarised alongside our observations on those provisions. Treasurers may, however, find it helpful to review this Guide alongside a copy of the relevant terms, to properly familiarise themselves with the LMA RFR Templates. The LMA’s RFR documentation is available to LMA members only, although it can be provided to non-members (for example, by legal advisers or relationship banks) in the course of a transaction. Some borrowers have joined the LMA, providing them with direct access to LMA documentation and guidance on LIBOR transition. Further information on LMA membership is available on the LMA website. This Guide considers only the interest rate and related provisions of the LMA RFR Templates. It does not cover other provisions of the Compounded/Term MTR that borrowers might wish to discuss with their lenders, which remain unchanged from the LMA’s pre-existing LIBOR/EURIBOR facility templates. The ACT Borrower’s Guide to the LMA’s Investment Grade Agreements (the ACT Borrower’s Guide) contains comprehensive guidance for borrowers on the provisions of the LMA facility templates more generally. The current edition of the ACT Borrower’s Guide speaks to the LMA multi-currency term and revolving facilities agreement referencing LIBOR and EURIBOR, from which the Compounded/Term MTR is derived. Our aim is to produce a fully revised version of the ACT Borrower’s Guide that speaks to the Compounded/Term MTR in due course, when RFR lending terms have become more established. Slaughter and May 12 April 2021 THE LMA’S RECOMMENDED FORMS OF FACILITY AGREEMENT FOR LOANS REFERENCING RISK-FREE RATES 5 Defined terms €STR means the Euro Short-Term Rate. Compounded Rate Loan means a loan in a Compounded Rate Currency. 5YHLB means the CAS calculation methodology based on the historic median Euro Working Group means the Working Group on Euro Risk-Free Rates. between LIBOR and the relevant RFR over a five-year lookback period from an agreed date. FCA means the UK Financial Conduct Authority. ACT means the Association of Corporate Treasurers. Forward approach means the CAS calculation methodology based on the forward-looking basis swap market, involving using forward-looking basis ACT Borrower’s Guide means the ACT Borrower’s Guide to the LMA’s swaps to calculate the implied future spread between the relevant RFR and Investment Grade Agreements, produced for the ACT by Slaughter and May LIBOR over the life of the loan and calculated as the linear interpolation (September 2017).

THE INTERNATIONAL DEBT CAPITAL MARKETS HANDBOOK 2020 23rd Edition The Great Transition: The search for a libor replacement by Esohe Denise Odaro, International Finance Corporation No one knew it at the time, but in 1969 Minos Zombanakis was soon to make history. That winter, the Greek financier had convened a group of banks in Manufacturers Hanover's newly minted London office. His intention? To formalise the first syndicated loan of its kind to fund an US$80m loan to Iran. Given the immense scale of the loan at that time, Zombanakis aimed to reduce lender risk and increase appetite among candidate banks by apportioning the credit across several lenders, thereby generating a syndicated loan. 38 At the time, interest rates in the UK were 8% and rising, so instruments and asset classes. From the early 1980s most banks were reluctant to lend at a fixed rate for an onwards, The British Bankers' Association (BBA) extended duration. Consequently, Zombanakis devised a administered the LIBOR rate-setting process. By 2005, the system whereby the borrower – in this case, Iran – could be BBA would survey a panel of 16 banks daily, and LIBOR was charged a variable interest rate. He proposed that the calculated using only the average of the median eight pricing should be based on the syndicate's weighted quotes. The BBA produced 150 LIBOR benchmarks in 10 average cost of funding plus a spread for a predetermined currencies with 15 maturities (overnight to 12 months). period. To achieve this, the banks in the lending syndicate Historically, only a few voiced apprehensions about the would report their funding costs before the loan's "rolling structural weaknesses of the LIBOR setting process.

Debt Instruments Set 2 Backus/Octob er 29, 1998 Bond Arithmetic 0. Overview Zeros and coup on b onds Sp ot rates and yields Day count conventions Replication and arbitrage Forward rates Yields and returns Debt Instruments 2-2 1. Why Are We Doing This? Explain nitty-gritty of b ond price/yield calculations Remark: \The devil is in the details" Intro duce principles of replication and arbitrage Debt Instruments 2-3 2. Zeros or STRIPS A zero is a claim to $100 in n p erio ds price = p n t + n t j j Pay p Get $100 n A spot rate is a yield on a zero: 100 p = n n 1 + y =2 n US treasury conventions: < price quoted for principal of 100 < time measured in half-years < semi-annual comp ounding Debt Instruments 2-4 2. Zeros continued A discount factor is a price of a claim to one dollar: p 1 n d = = n n 100 1 + y =2 n Examples US treasury STRIPS, May 1995 MaturityYrs Price $ DiscountFactor Sp ot Rate 0.5 97.09 0.9709 5.99 1.0 94.22 0.9422 6.05 1.5 91.39 0.9139 2.0 88.60 0.8860 6.15 Debt Instruments 2-5 3. Comp ounding Conventions A yield convention is an arbitrary set of rules for computing yields like sp ot rates from discount factors US Treasuries use semiannual comp ounding: 1 d = n n 1 + y =2 n with n measured in half-years Other conventions with n measured in years: 8 n >> 1 + y annual comp ounding > n > > > > > kn > > 1 + y =k \k" comp ounding n > > < ny n e continuous comp ounding k !1 d = n >> > > 1 > > 1 + ny \simple interest" > n > > > > > : 1 ny \discount basis" n All of these formulas de ne rules for computing the yield y from the discount factor d , but of course they're all n n di erent and the choice among them is arbitrary.

Federal Home Loan Banks Consolidated Bonds and Consolidated Discount Notes (With Maturities of One Day Or Longer)

INFORMATION MEMORANDUM Federal Home Loan Banks Consolidated Bonds and Consolidated Discount Notes (with maturities of one day or longer) The terms “we,” “us” and “our” as used throughout this Information Memorandum mean the Federal Home Loan Banks (the “FHLBanks”), acting by and through the Office of Finance, a joint office of the FHLBanks (together with its successors and assigns, the “Office of Finance”). We may offer consolidated bonds (the “Bonds”) and consolidated discount notes (the “Discount Notes” and, together with the Bonds, the “Securities”) pursuant to this Information Memorandum (as defined herein) and, in the case of the Bonds, a Pricing Supplement or an Offering Notice (each, a “Supplement”) that will contain the specific terms of, and pricing details for, each particular issue (sometimes referred to as “series”) of Bonds. The Securities will constitute joint and several unsecured general obligations of the FHLBanks. No person other than the FHLBanks will have any obligations or liability with respect to the Securities. The Securities will be denominated in U.S. dollars or as may otherwise be specified by us at the time of issue in the applicable Supplement (the “Specified Currencies”). There is no specific limit on the aggregate principal amount of Securities that we may issue. The Securities will have maturities of one day or longer from the date of their original issuance. The Bonds will bear interest as set forth in the applicable Supplement. Principal payments on the Bonds may be made periodically or only at maturity. Any index or formula used to determine the principal or interest payable on the Bonds will be set forth in the applicable Supplement.

LIBOR Transition - Frequently Asked Questions Published: 9 January 2019 This document is a summary of the questions submitted during or following the webinar on LIBOR transition recorded on 6 December 2018 and which can be accessed at: https://www.treasurers.org/webinars/LIBORtransition In addition to the responses below, ‘What you need to know about LIBOR transition’ produced by the Working Group on Sterling Risk-Free Reference Rates; The Treasurer’s Checklist and materials on https://www.treasurers.org/liborreform are helpful resources. 1. Selection of Risk Free Rates by currency > What does SONIA stand for? > Is LIBOR cessation only for GBP? > Has a USD LIBOR alternative been selected yet? This announcement impacts all 5 LIBOR currencies: USD, GBP, JPY, EUR, CHF. Other countries are also considering changing their term benchmarks for similar reasons (e.g. BBSW in Australia). The alternative RFR (near Risk Free Rates) benchmarks that have been identified are: US: SOFR Secured Overnight Funding Rate EURO: ESTER European Short-Term Euro Rate Japan: TONAR Tokyo Overnight Average Rate Switzerland: SARON Swiss Average Rate Overnight UK: SONIA Sterling Overnight Index Average > When is the SOFR reference rate expected to be ready? > You mentioned H2-19 for the UK, what is the expected timeframe for the US SOFR benchmark? The ARRC (US working group)’s timetable and key milestones are here: https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2018/ARRC-Progress-Timeline-Oct- 30.pdf More details and historic data are available at https://apps.newyorkfed.org/markets/autorates/sofr. > What does ESTER relate to? i.e. what currencies would this apply to? It relates to EUR denominated transactions.

ISDA International Swaps and Derivatives Association, Inc. EMU AND MARKET CONVENTIONS: RECENT DEVELOPMENTS 1. Introduction On 16th July, 1997, ISDA, along with a number of other trade associations, Cedel and Euroclear, published a joint statement on market conventions for the euro. That joint statement was subsequently supported by both the European Commission and the European Monetary Institute (now the European Central Bank). The joint statement was intended to focus attention on the need to establish a set of market conventions for the euro. Conventions of the type dealt with in the joint statement tend to differ between currencies, largely for historical rather than valid market reasons. It was inconceivable that the new single currency should itself suffer from the mixture of market conventions which apply to the various national currencies that it is due to replace. At the time of publication, the joint statement reflected a broad market consensus view on what standard market practice should be for new euro-denominated transactions entered into after 1st January, 1999. It also advocated that for "legacy" instruments or transactions (those entered into before 1999 in national currency units or the ECU, but maturing after 1st January, 1999) which incorporated the old national currency conventions, no change should be made to update the conventions. The purpose of this memorandum is to bring the issue of harmonised market conventions for the euro up to date in light of developments that have taken place since the publication of the joint statement over a year ago. A summary of the proposed market conventions for the euro financial markets is attached as Exhibit 1.

R E P O R T APAC IBOR Transition Benchmarking Study. July 2020 Banking & Finance. 0 0 sia-partners.com 0 0 Content 6 • Executive summary 8 • Summary of APAC IBOR transitions 9 • APAC IBOR deep dives 10 Hong Kong 11 Singapore 13 Japan 15 Australia 16 New Zealand 17 Thailand 18 Philippines 19 Indonesia 20 Malaysia 21 South Korea 22 • Benchmarking study findings 23 • Planning the next 12 months 24 • How Sia Partners can help 0 0 Editorial team. Maximilien Bouchet Domitille Mozat Ernest Yuen Nikhilesh Pagrut Joyce Chan 0 0 Foreword. Financial benchmarks play a significant role in the global financial system. They are referenced in a multitude of financial contracts, from derivatives and securities to consumer and business loans. Many interest rate benchmarks such as the London Interbank Offered Rate (LIBOR) are calculated based on submissions from a panel of banks. However, since the global financial crisis in 2008, there was a notable decline in the liquidity of the unsecured money markets combined with incidents of benchmark manipulation. In July 2013, IOSCO Principles for Financial Benchmarks have been published to improve their robustness and integrity. One year later, the Financial Stability Board Official Sector Steering Group released a report titled “Reforming Major Interest Rate Benchmarks”, recommending relevant authorities and market participants to develop and adopt appropriate alternative reference rates (ARRs), including risk- free rates (RFRs). In July 2017, the UK Financial Conduct Authority (FCA), announced that by the end of 2021 the FCA would no longer compel panel banks to submit quotes for LIBOR. And in March 2020, in response to the Covid-19 outbreak, the FCA stressed that the assumption of an end of the LIBOR publication after 2021 has not changed.

Executive Summary SIFMA Insights: Secured Overnight Financing Rate (SOFR) Primer The transition away from LIBOR July 2019 SIFMA Insights Page | 1 Executive Summary Contents Executive Summary . 4 The Transition Away from LIBOR . 6 What is LIBOR? . 6 Why Is LIBOR Important. 8 Why Transition to New Reference Rates, Away from LIBOR? . 9 Who Is Impacted by the Transition? . 9 US Transition Plan . 11 Establishing the ARRC .

JUNE 2021 LIBOR Transition AT A GLANCE WHAT IS LIBOR? Following guidance from the Financial Stability Board (FSB), regulatory led public/private working groups Interbank Offered Rates (IBORs), commonly referred were established to identify and promote adoption to as the London Interbank Offered Rate (LIBOR), are of robust alternate risk free rates (ARFRs) that were systemically important interest rate benchmarks, aimed based on substantial underlying transactions to at providing an indication of the average rates at which replace the various LIBOR currency rates. Most RFRs banks can obtain unsecured funding from each other were created as a response to the end of LIBOR; while in various currencies. Various regulatory authorities SONIA, which was historically referenced on overnight have announced their support for a reduced reliance on transactions, was reformed. IBORs, with cessation dates starting at the end of 2021, detailed in Figure 1. LIBOR has often been used in the industry as an interest rate benchmark rate for various LIBOR VERSUS RFR financial products ranging from capital markets to lending products including mortgages. LIBOR RFR In addition to LIBOR cessation, other benchmarks Term Term rate An overnight rate such as EONIA (Euro Overnight Index Average) will be benchmark e.g. (with no existing ceasing publication on 3 January 2022 and there are 3M, 6M, 1Y term structure)1 a number of other benchmarks that reference LIBOR in their calculations, which will be reformed, including View Forward-looking Backward-looking SOR (Singapore Dollar Offer Rate) and THBFIX (Thai Baht Fix). Secured? Unsecured Some based on a secured overnight rate, others WHAT ARE RISK FREE RATES (RFRS)? unsecured RFRs are interest rate benchmarks that seek to Credit Risk Embedded credit Near to risk free, measure the overnight cost of borrowing cash by risk component as there is no bank banks, underpinned by actual transactions.

October 2019 TOPIC OF FOCUS: REGULATORY LIFE AFTER LIBOR On the Web: https://wam.gt/2BRKmQR LIBOR is one of the most important interest rates in the world, with fnancial products of about $200 trillion tied to its benchmark rate. But LIBOR is being phased out in 2021 and the transition to a new reference rate will be a major undertaking for fnancial institutions great and small. Here we provide a high-level overview of the situation based on the facts available today and provide guidance regarding the upcoming transition from and likely replacements to LIBOR. KEY TAKEAWAYS LIBOR is one of the world’s most widely used fnancial benchmarks for short-term interest rates and determines the rate for unsecured short-term borrowing between banks. LIBOR will be phased out at the end of 2021 and the transition to a new reference rate will be a major undertaking for many fnancial institutions. Due to the vast number of fnancial vehicles tied to LIBOR, it will be replaced by several diferent indices that will serve the same function going forward. Several working groups around the world have been researching their respective Thomas McMahon Product Specialist recommendations to replace LIBOR for their local markets. Western Asset is monitoring the situation closely, and providing this summary of the status of the LIBOR retirement to help investors and fnancial professionals best prepare for the transition ahead. © Western Asset Management Company, LLC 2019. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients.

Issue 6 | June 2021 Die deutsche Übersetzung folgt dem englischen Text The Q2 2021 industry targets for LIBOR transition are rapidly approaching, Following Useful Resources the successful adoption of the 31st March 2021 targets, the market has now ceased Deutsche Bank IBOR initiation of new GBP LIBOR-linked loans, bonds, securitisations and linear Transition website derivatives* that expire after the end of 2021. Deutsche Bank IBOR videos: Q2 LIBOR transition targets - Introduction to LIBOR British pound transition — Cease initiation of new GBP LIBOR non-linear derivatives that expire after end- 2021*. - Challenges and Deutsche Bank’s approach — Cease initiation of new GBP LIBOR exchange-traded derivatives that expire after end-2021*. Industry newsletters — Progress active conversion of all legacy GBP LIBOR contracts expiring after end-2021 where viable. If not viable, then ensure robust fallbacks are adopted BoE RFR Newsletter – where possible. May 2021 NEW ARRC RFR Newsletter – *Except for risk management of existing positions (Sterling RFR WG Guidance). April/May 2021 NEW Swiss franc Get in Touch — Per FINMA guidelines all new Swiss franc contracts should use SARON-based benchmarks by 30th June 2021. Investment Bank, Corporate Bank and Capital Release Unit Japanese yen DWS — Cease issuance of new loans and bonds referencing JPY LIBOR that mature after the end of 2021. Private Bank U.S. dollar Social media — The Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Search Twitter and LinkedIn for Office of the Comptroller of the Currency (OCC) have encouraged banks to cease entering into new LIBOR contracts as soon as practicable, and in any event no #DeutscheBankIBORtranstion later than December 31, 2021, except under specific circumstances, (Read USD LIBOR usage exceptions) — The ARRC’s best practices are just that, and intended to support the Federal Reserve’s hard deadline of ceasing entering into new contracts that use USD LIBOR as a reference rate no later than 31st December 2021.

Investment Professionals only Our preparation for the reform of LIBOR Some frequently asked questions March 2021 • Alternative rates have been identified to replace the London Interbank Offered Rate (LIBOR) and other IBORs as market standard benchmark interest rates as their publication comes to an end. • Sterling LIBOR is being replaced by SONIA, the Sterling Overnight Index Average. • M&G has a company-wide project team to orchestrate the transition from LIBOR and the other IBORs to the respective replacement rates. • Any effect on the value of your investments, at the time the change occurs, is expected to be minimal and we undertake not to introduce inferior terms to our clients as a consequence of this process. • You do not need to take any action. We will communicate to you any planned changes to objectives of funds you are invested in before they take effect. The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Where past performance is shown, please note that this is not a guide to future performance. GENERAL benchmark rates to be both administered by central banks and based on actual transactions in deep and liquid What is LIBOR and what is happening to it? markets. Introducing SONIA to replace LIBOR for sterling interest rates aims to achieve those objectives. LIBOR stands for the London Interbank Offered Rate and In the wake of the Global Financial Crisis over a decade is the interest rate (or more specifically, a family of ago, banks have been making less use of the interbank interest rates) at which banks lend to each other on a lending market.

Transitioning from Interbank Offered Rates (IBORs) to new Risk Free Rates (RFRs)* September 2019 In recent years, international and domestic authorities alike have actively These documents have been updated from their previous versions (April worked with the private sector to address LIBOR’s shortcomings and to 2019) to include rates for the Australian dollar, Canadian dollar, Hong find alternative rates. In 2013, the International Organization of Securities Kong dollar and Singapore dollar in addition to the currencies included in Commissions (IOSCO) developed an international set of principles the initial documents (Japanese yen, Euro, UK pound sterling, U.S. dollar for financial benchmarks. These principles—which include 19 specific and Swiss franc). standards across governance, benchmark quality, methodology, and accountability—have emerged as the international standard. IOSCO has The information contained herein is based on the work of the FSB rightly focused on tying benchmarks more closely to observable, arms- through the OSSG as well as other publicly available information. For length transactions. ongoing IBOR transition updates, please reference the individual central bank working groups: The Financial Stability Board (FSB) and its members have published proposals, plans, and timelines for reference rate reform and have • Japanese yen: Study Group on Risk-Free Reference Rates and the promoted the strengthening of the major interest rate benchmarks. The Bank of Japan Cross-Industry Committee on Japanese Yen Interest FSB and its members have been carrying out work on the development Rate Benchmarks and introduction of alternative benchmarks, developing a plan to • Euro: Working Group on Euro Risk-Free Rates accomplish a transition to new benchmarks, encouraging work by the private sector on contract robustness, and reporting regularly on the • UK pound sterling: Working Group on Sterling Risk-Free Rates progress made.