The preliminary result of ISDA’s consultation about whether to include wording in its LIBOR fallback wording which would trigger a switch to the fallback (RFR plus margin) before LIBOR ceased publication, at a point when LIBOR had ceased to be ‘representative’, was announced on 9 August 2019. The result could not have been much less helpful, with the 89 responses, from banks, broker-dealers, insurers, AIFMs, government agencies and CCPs, broadly equally divided into (a) yes, (b) no, and (c) yes, if it has various elements of optionality and flexibility built into it. The full summary is expected in September. ISDA now envisages a further consultation on wording that includes a pre-cessation fallback trigger in a way that accommodates the concerns raised by the replies to this consultation whilst avoiding “unnecessary complication and optionality” and “anything that could jeopardize broad market adoption of the permanent cessation fallbacks”. Regulators have been pushing for a pre-cessation trigger but there is evidently a way to go yet.

For the permanent cessation fallbacks, ISDA is currently amending the relevant provisions of the 2006 ISDA Definitions via a “supplement” so that the amendments apply to all transactions entered on or after the effective date of the supplement, and is offering a protocol for market participants to agree that the terms of the supplement will apply to existing transactions.