LIBOR / RODNE – References and Appendices.

In this post we detail the reference material supporting a series of posts addressing the end of Libor and her relatives.

References

• Reforming LIBOR and Other Financial Market Benchmarks – Darrell Duffie and Jeremy C. Stein, JEP spring 2015
• The Alternative Reference Rates Committee June 16, 2017 Presentation Materials
• Market Participants Group on Reforming Interest Rate Benchmarks Final Report 2014
• SONIA recommended as the sterling near risk-free interest rate benchmark, 28 April 2017
• Minutes of the Meeting of the Working Group on Sterling Risk-Free Reference Rates, 7 April 2017
• SONIA as the RFR and approaches to adoption June 2017
• NEW WORKING GROUP ON A RISK-FREE REFERENCE RATE FOR THE EURO AREA

 

Appendix 1 – Documentation examples.

Examples of new text highlighting Libor uncertainty

Kraft Heinz Foods Company, Prospectus Supplement dated August 7, 2017

Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined or the establishment of alternative reference rates. For example, on July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. Furthermore, in the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom, in the United States or elsewhere. Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the trading market for LIBOR-based securities, including the Notes. Reform of, or the replacement or disappearance of, LIBOR and proposed regulation of LIBOR and other “benchmarks” may adversely affect the value of and return on the Notes

Alain Affelou company Prospectus Supplement dated October 2017

“EURIBOR,” with respect to an Interest Period, means the rate (expressed as a percentage per annum) for deposits in euros for a three-month period beginning on the day that is two TARGET Settlement Days after the Determination Date that appears on Bloomberg Page 248 as of 11:00 a.m. London time, on the Determination Date. If Bloomberg Page 248 does not include such a rate or is unavailable on a Determination Date, the Calculation Agent will request the principal London office of each of four major banks in the Euro-zone inter-bank market, as selected by the Issuer, to provide such bank’s offered quotation (expressed as a percentage per annum) as of approximately 11:00 a.m. London time, on such Determination Date, to prime banks in the Euro-zone inter-bank market for deposits in a Representative Amount in euros for a three-month period beginning on the day that is two TARGET Settlement Days after the Determination Date. If at least two such offered quotations are so provided, the rate for the Interest Period will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, the Calculation Agent will request each of three major banks in London, as selected by the Issuer, to provide such bank’s rate (expressed as a percentage per annum), as of approximately 11:00 a.m., London time, on such Determination Date, for loans in a Representative Amount in euros to leading European banks for a three-month period beginning on the day that is two TARGET Settlement Days after the Determination Date. If at least two such rates are so provided, the rate for the Interest Period will be the arithmetic mean of such rates. If fewer than two such rates are so provided then the rate for the Interest Period will be the rate in effect with respect to the immediately preceding Interest Period. Notwithstanding the foregoing, if for any Interest Period the rate determined based on the procedure specified in this paragraph is less than 0.0%, EURIBOR shall mean 0.0% for purposes of determining the Applicable Rate for such Interest Period.

Appendix 2 – LIBOR footprints across the five LIBOR currency regimes

All tables are sourced from the MPG (Market Participants Group on Reforming Interest Rate Benchmarks Final Report 2014) report, and include author calculations.

US$ LIBOR MARKETS

Exhibit : USD LIBOR Market Footprint by Asset Class   Asset Class	Volume (USD Bill) As of 2012	% of LIBOR-related	Estimated exposure   to LIBOR	Percent Roll-off after 5-years
Loans	22,419	33.1%	7,412
Syndicated loans	3,400	97%	3,298	90%
Corporate business loans	1,650	30-50%	660
Non-corporate business loans	1,252	30-50%	501
Commercial real estate/Commercial Mortgages	3,583	30-50%	1,433
Retail Mortgages	9,608	15%	1,441
Credit Cards	846	Low
Auto Loans	810	Low
Consumer Loans	139	Low
Student loans	1,131	7%	79
Bonds	1,470	84.0%	1,235
Floating / variable rate notes	1,470	84%	1,235	73%
Securitizations	9,836	26.0%	2,556
RMBS	7,500	24%	1,800	3%
CMBS	636	4%	25	12%
ABS	1,400	37%	518	15%
CDO	300	71%	213
Over-the-counter derivatives	171,146	65.0%	111,245
Interest-rate swaps	106,681	65%	69,343	65%
Forward Rate Agreements (FRAs)	29,044	65%	18,879	100%
Interest-rate options	12,950	65%	8,418	74%
Cross-currency swaps	22,471	65%	14,606	76%
Exchange-traded derivatives	32,897	92.0%	30,272
Interest-rate options	20,600	98%	20,188	100%
Interest-rate futures	12,297	82%	10,084	99%
Grand Total	237,768	64.7%	152,720	76%

 STERLING LIBOR MARKETS

Exhibit : Sterling LIBOR Market Footprint by  Asset Class   Asset Class	Volume (USD Bill) As of 2012	% of LIBOR-related	Estimated exposure   to LIBOR	Percent Roll-off after 5-years
Loans	2,799	17.2%	481
Syndicated loans	125	100	125	89%
Corporate business loans	305	90	275	40%
Non-corporate business loans	181	31	56
Commercial real estate/Commercial Mortgages	272	low
Retail Mortgages	1,662	1.5	25
Credit Cards	80	Low
Auto Loans		low
Consumer Loans	99	low
Student loans	75	0	–
Bonds	800	54.0%	432
Floating / variable rate notes	800	54	432	49%
Securitizations			–
RMBS	562	95.4%	536
CMBS	377	100	377	1%
ABS	42	100	42	62%
CDO	78	67	52	24%
Over-the-counter derivatives	65	100	65
Interest-rate swaps	45,747	63.0%	28,821
Forward Rate Agreements (FRAs)	30,187	63	19,018	57%
Interest-rate options	8,965	63	5,648	100%
	3,091	63	1,947	71%
Cross-currency swaps	3,504	63	2,208	66%
Exchange-traded derivatives	3,504	98.4%	3,449
Interest-rate options	1,668	100	1,668	91%
Interest-rate futures	1,836	97	1,781	95%
Grand Total	53,412	63.1	33,718	68%

EUR-LIBOR & EURIBOR MARKETS

Exhibit : EURIBOR Market Footprint by  Asset Class   Asset Class	Volume (USD Bill) As of 2012	% of EURIBOR-related	Estimated exposure   to EURBOR	Percent Roll-off after 5-years	% of which EUR-LIBOR
Loans	13,330	40.6%	5,406
Syndicated loans	535	90	482	89%	4%
Corporate business loans	4,322	60	2,593	42%
Non-corporate business loans	1,518	60	911
Commercial real estate/Com  Morts			–
Retail Mortgages	5,073	28	1,420
Credit Cards
Auto Loans	1,082	Low
Consumer Loans	800	Low
Student loans			–
Bonds	5,202	46.9%	2,440
Floating / variable rate notes	2,645	70	1,852	76%
Covered Bonds (euro ccy)	2,557	23	588
Securitizations	1,421	96.2%	1,367
RMBS	952	100	952	1%
CMBS	107	100	107	37%
ABS	197	91	179	19%	9%
CDO	165	78	129		17%
Over-the-counter derivatives	197,092	100.0%	197,092
Interest-rate swaps	137,553	100	137,553	62%	0.01%
Forward Rate Agreements (FRAs)	25,559	100	25,559	100%	0.01%
Interest-rate options	24,249	100	24,249	62%	0.01%
Cross-currency swaps	9,731	100	9,731	72%	0.01%
Exchange-traded derivatives	17,344	100.0%	17,344
Interest-rate options	12,439	100	12,439	95%	0.01%
Interest-rate futures	4,905	100	4,905	95%	0.01%
Grand Total	234,389	95.4	223,649	68%	0.04%

 

YEN LIBOR AND TIBOR MARKETS

Exhibit : Yen  LIBOR Market Footprint by  Asset Class   Asset Class	Volume (USD Bill) As of 2012	% of LIBOR-related	Estimated exposure   to LIBOR	Percent Roll-off after 5-years
Loans	5,518	23.8%	1,311
Syndicated loans	769	80	615
Corporate business loans	3,477	20	695
Non-corporate business loans	–		–
Commercial real estate /        Commercial Mortgages	–
Retail Mortgages	1,272	0	–
Credit Cards	–	0
Auto Loans	–	0
Consumer Loans	–	0
Student loans	–	0	–
Bonds	51	0	33
Floating / variable rate notes	51	65	33
Securitizations	32	17.7%	6
RMBS	21	10	2
CMBS	3	10	0
ABS	4	80	3
CDO	4		–
Over-the-counter derivatives	53,077	57.3%	30,950
Interest-rate swaps	41,928	60	25,157
Forward Rate Agreements (FRAs)	41	60	25
Swaptions	4,010	60	2,406
Basis swaps	4,041	50	2,021
Interest-rate options	297	80	238
Cross-currency swaps	2,759	40	1,104
Exchange-traded derivatives	451	100.0%	451
Interest-rate options	–	100	–
Interest-rate futures	451	100	451
Grand Total	59,129	55.4	32,751

SWISS FRANC LIBOR MARKETS

Exhibit : Swiss Franc LIBOR Market Footprint by  Asset Class   Asset Class	Volume (USD Bill) As of 2012	% of LIBOR-related	Estimated exposure   to LIBOR	Percent Roll-off after 5-years
Loans	1,181	23.8%	202
Syndicated loans	91	60	55
Corporate business loans	52	50	26
Non-corporate business loans	89	15	13
Commercial real estate/Commercial Mortgages	232	20
Retail Mortgages	717	15	108
Credit Cards
Auto Loans
Consumer Loans
Student loans			–
Bonds	24	100.0	24
Floating / variable rate notes	24	100	24
Securitizations	–		–
RMBS		10	–
CMBS		10	–
ABS		80	–
CDO			–
Over-the-counter derivatives	6,098	99.2%	6,048
Interest-rate swaps	4,032	100	4,032	65%
Forward Rate Agreements (FRAs)	1,079	100	1,079	100%
Swaptions			–	0%
Basis swaps	489	100	489	77%
Interest-rate options			–
Cross-currency swaps	498	90	448	73%
Exchange-traded derivatives	200	100.0%	200
Interest-rate options			–
Interest-rate futures	200	100	200	100%
Grand Total	7,503	86.3	6,474	71%