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ISDA IBOR Fallback Protocol
An important development for interest rate hedgers as part of the LIBOR transition to a replacement benchmark interest rate needs your attention. ISDA created a Fallback Protocol you need to understand. Accepting it automatically adds provisions to your interest rate caps, swaps an other derivatives to handle the transition away from LIBOR to SOFR or other benchmark rate.
What the ISDA IBOR Protocol means for you
The ISDA IBOR Protocol is an addition to your existing ISDA contracts for interest caps, swaps and other interest rate hedging products. It provides standardized Fallback provisions to govern how your contracts will be handled after LIBOR and other IBOR indexes are replaced.
What’s happening to LIBOR?
Regulators are forcing LIBOR to be abandoned. ISDA (International Swaps and Derivatives Association, Inc.) governs the standardized contract used for derivatives, including LIBOR and other IBOR indexes. The majority of ISDA agreements need changes to handle the demise of LIBOR and related indexes.
What do you need to do?
Fallback provisions in ISDA agreements specify the details of how your derivative will be valued when LIBOR is no longer available. Agreeing to the Protocol means standard Fallback language is added to your ISDA agreements. The process is conducted in a few steps on ISDA’s website and is known as Adhering to the Protocol.
- Go to https://ISDA.org and set up an account if you don’t have one already.
- Navigate to https://www.isda.org/protocol/isda-2020-ibor-fallbacks-protocol/ and start the process by clicking “Adhere to this Protocol” button.
- Complete the forms for each entity that has an existing hedge.
Derivative Logic is here to help!
We’re expert derivatives consultants and will be delighted to explain what’s happening and what you can do for your specific business. We will walk you though Adhering to the IBOR Protocol, quickly and easily.