IBOR (Interbank Offered Rate) transition: Impact on corporate actions and recommendations for a smooth transition

Clearstream Banking¹ would like to inform customers that over the past years, international efforts have been made on the benchmark rate reform, impacting securities held in the International Central Securities Depositories’ (ICSDs) systems:

• The London Interbank Offered Rate (LIBOR) is currently scheduled to be discontinued on the following dates, depending on the currency and the tenor:
  • 31 December 2021 is the proposed discontinuation date for:
    • CHF LIBOR;
    • EUR LIBOR;
    • GBP LIBOR;
    • JPY LIBOR; and
    • Two tenors of the USD LIBOR, namely one week and two months.
  • USD LIBOR may be available until 30 June 2023 for the remaining tenors.
    The final discontinuation date is still to be confirmed.
• The Euro Interbank Offered Rate (EURIBOR) is currently not expected to discontinue at the same time as LIBOR. However, the working group on euro risk-free rates has been working on public consultations on €STR-based fallback rates. In the future, EURIBOR may transition into €STR.
• Other IBORs may also be reformed or replaced in the future.

Impact of the IBOR transition

As a result, the securities that use IBORs as benchmark rates may require:

• A transition to new benchmark rates, also known as Alternative Reference Rates (ARRs) or Risk-Free Rates (RFRs).
• A change in the fallback provisions in the Terms and Conditions of the security to cope with both a permanent and a temporary discontinuation of the benchmark rate.

Clearstream Banking recommendations for a smooth transition

Recommendation paper

Both ICSDs, Clearstream Banking S.A. and Euroclear Bank SA/NV, are actively involved in the industry discussions on the IBOR transition and have been working closely with the representatives from the International Capital Market Services Association (ICMSA) to identify and address the various implications of the IBOR transition for Eurobonds deposited with a Common Depository/Common Safekeeper.

Following those discussions, the ICSDs have written a joint recommendation paper for a smooth transition, focusing on the main impact on corporate actions, and, more specifically, interest payments for floating rate notes/securitisations.

The IBOR transition will require a significant transformational effort by all parties in the chain: The issuer, its legal counsel and agents, arrangers, Common Depository/Common Service Provider, the ICSDs, the ICSDs’ clients and their underlying clients, including final beneficial owners. Therefore, the recommendation paper might be of interest to all of these parties.

Recommended actions for customers

Each section of the ICSD’s recommendation paper defines recommended actions for the customers.  

To ensure a smooth migration of existing securities, Clearstream Banking encourages customers to respond to consent solicitations and to send their instructions in a timely manner.

Please find more details in Section 3.2.5 of the ICSD’s recommendation paper (see attachment below).

Frequently Asked Questions (FAQ)

Additionally, a Frequently Asked Question (FAQ) has been made available for the ICSDs’ clients (see attachment below).

Further developments

Clearstream Banking is closely monitoring the situation and will inform the customers of any further developments.

Further information

For further information, please contact Clearstream Banking Client Services or your Relationship Officer.

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1. Clearstream Banking refers Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.