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LIBOR Transition: Transition Using the ISDA Credit Adjustment Spreads

LIBOR, the world’s most used interest rate benchmark, will soon cease to exist and be replaced by new ‘Risk-Free Rates’ (RFRs). Fixed ‘Credit Adjustment Spreads (CAS)were recently announced to transition derivative contracts from LIBOR to RFRs, and will potentially also apply to loans and bonds. Secure you place at this AFB workshop and learn how the CAS will work and how to plan your portfolio transition using them.

The AFB is delighted to partner with FMCR, a specialist financial markets consultancy firm, who have designed this third Practice workshop in the series to help foreign banks understand the business impact that transition from LIBOR to RFR rates will have.

The announcement on 5 March 2021 of a set of fixed CAS to apply to derivative contracts represents the culmination of years of consultation with ISDA market participants to find a fair approach to the transition of legacy deals. The resulting set of fixed adjustments can now be applied to any transitioning LIBOR deal.

This Practice workshop will cover the detail of, and the reasoning behind, the CAS calculation methodology. It will also examine the impact to foreign banks of the practical application of CAS to the transition of existing deals and contrast with using a market-derived adjustment spread.  Attendance at the previous two workshops is not necessary to attend this one.

Why attend?

This Practice workshop will focus on the practical choices foreign banks need to make when dealing with the transition of existing LIBOR deals. Case studies will be used to illustrate the different approaches available. Questions will be welcome throughout the session and time will be allocated to group work discussion.

Specifically, the session will cover:

  •        Answering the question of a what makes a fair transition. How do we ensure that value transfer is minimised across the market when the rate benchmark is changed?
  •        What are the practical choices available for transitioning a legacy LIBOR deal?
  •        When should transition of deals occur – before or on the last LIBOR publication date?
  •        For early transitions, what are the pros/cons of using the ISDA CAS versus a market-derived spread? How should banks ensure clients are getting fair treatment on transition?
  •        Do the ISDA CAS have a role in pricing new RFR-linked loan business?

What will participants be able to implement Back@Bank after this virtual workshop?

  •        Participants will take away a good understanding of the practical application of the recently announced ISDA CAS in transitioning legacy LIBOR deals; along with an understanding of the choices available to foreign banks and their clients for           early transition.
  •        This understanding will better enable participants to help formulate the best and fairest approach to transitioning legacy LIBOR portfolios and managing client expectations.

Who should attend?

This workshop is aimed at those upon whom the transition away from LIBOR will have an impact, either practically or strategically. This will typically be those who work in: front office treasury and corporate lending roles, senior management, technology and system infrastructure, risk management, operations and settlements, finance/accounts.

Speaker biography

The speaker will be Mark Taylor from FMCR. Mark is a former interest rate derivatives trader who has first-hand experience of LIBOR products and practical knowledge of interest rate technicalities. Mark is a financial markets consultant who has delivered many training sessions and workshops on LIBOR transition, as well as working with clients on their transition projects.

Optional Open Surgery from 10:00 – 10:30

After the virtual Practice workshop finishes at 10:00, members who wish to do so, can remain online for an Open Surgery session with our FMCR speakers. The session is open until 10:30.

Logistics

Cost:               £220 + VAT

Format:           Virtual workshop (platform: Zoom)

Date:               Tuesday 18 May 2021

Time:               09:00 – 10:00 – Virtual Practice workshop

                       10:00 – 10:30 – Optional Open Surgery

Places:            Maximum of 30 people

The session is intended to be interactive and allow participants to discuss the examples provided, raise their own challenges and receive feedback from others. To enable this interaction, participants should ensure they can join by video. There will be ample opportunity for questions throughout the session, however, if you would like to submit a question before or have any specific questions or areas that you would like the Practice workshop to address, please send them to the AFB at secretariat@foreignbanks.org.uk  as soon as practicable. The Practice workshop will be held under the Chatham House Rule, in order to promote free and constructive discussion.

You will receive details on how to join the Virtual Practice workshop a few days before the event.