LIBOR cessation: demystifying the switch to risk-free rates

Current site :    HK   |   EN
China Hong Kong SAR
United Kingdom
United States

This article was written by Dale Rayner and Jenny Zhao, with thanks to Alix Prentice, Richard Mazzochi, Jessie Chong and Helena Busljeta for their research and contributions.

It's official.

On 5 March 2021 the UK Financial Conduct Authority (FCA) announced[1] that all LIBOR settings will either cease to be published by any administrator or will no longer be representative at specified future dates, with a clear message to market participants: "act now and complete your transition by the end of 2021."  See our recommended "dates to diarise" below.

Market participants should consider whether FCA's latest announcement constitutes a pre-cessation or cessation trigger under their LIBOR-linked contracts.  Where parties have incorporated Asia Pacific Loan Market Association (APLMA) or Loan Market Association (LMA) rate switch language in their contracts, the FCA announcement will likely (though not in all cases) constitute a "Rate Switch Trigger Event" for a rate switch currency.  This means that the rate will switch to an RFR on the date on which the relevant LIBOR rate for the quoted tenor ceases to be published or otherwise becomes unavailable (or on any earlier date specified in the documents).  Agents for syndicated lenders should be aware that certain notification obligations may have already been triggered under the contracts they manage.

The International Swaps & Derivatives Association (ISDA) has also confirmed[2] that the FCA announcement is an index cessation event under the LIBOR 2020 IBOR Fallbacks Protocol (the "Protocol").  As a result, the FCA announcement has locked in Bloomberg's fallback spread calculations for all Sterling, USD, Euro, Swiss Franc and JPY LIBOR settings.  For clients who already adhere to the Protocol, their ISDA contracts will transition automatically to replacement rates when LIBOR ends. 

With the clock now ticking louder towards the end of LIBOR, even the most reluctant observers are now aware that the question is no longer 'whether' or 'when', but 'how' to manage the transition.

In this digest, we provide an overview of what benchmark reform is, why this matters and what you should be doing to prepare your business. 

LIBOR cessation
In this digest, we provide an overview of what benchmark reform is, why this matters and what you should be doing to prepare your business.


245KB, 10 Pages

We set out in this article some key issues to which banks and corporates need to pay attention in the final stage of London Interbank Offered Rate (LIBOR) transition in the Hong Kong SAR and mainland PRC lending market. If you have any questions or feedback, please get in touch.

29 November 2022

Climate change related legal action is a real and growing threat. Businesses in Asia and across the globe are subject to increasingly stringent disclosure requirements relating to environmental, social and governance issues and will be held accountable for misstatements and false representations. As the world rallies to achieve net zero emissions, legal action has moved beyond the purely punitive or remedial to become a much more dynamic and strategic tool for bringing about broader change. It is not just the outcome of litigation that is important. In an age of social media, the activism and attention that climate related litigation generates can be just as (if not more) significant than a court judgment for ‘win’ or ‘lose’. In this article, we consider the implications of climate related litigation and the strategies that can be used to help mitigate the risks.

28 November 2022

On 20 November 2022, the requirements relating to management and disclosure of climate-related risks by fund managers (with less than HKD8 billion AUM) under the updated SFC’s Fund Manager Code of Conduct started to apply. This KWM Brief Sheet sets out 10 points on climate-related compliance and risk disclosure for fund managers under the current SFC regime in Hong Kong.

24 November 2022