Reform of Interest Rate Benchmarks: Transition to a World without IBORs
Dates: March 26 - 27, 2020
Price: EUR 1,400
Location: Prague, NH Hotel Prague
Lecturer: Mark Taylor
Attend this 2-day training course and learn about:
What has gone wrong with IBOR rates and why a replacement is needed?
The chosen the replacements - the new risk-free rates (RFRs)
The differences between IBOR rates and the new RFRs
The transition process from IBOR to RFRs for banks, companies and investors
How RFR-linked bonds work and the market for them?
The change in the world of corporate lending towards RFR-linked floating rate loans
The new RFR-linked derivative products and their pricing
The process of migrating legacy IBOR deals on to RFR terms
The latest ISDA consultation results on fallback rate calculation
This 2-day course offers an insight into the journey from IBOR rates to their new replacement benchmarks, from the perspective of banks, companies and investors.
The future of interest rate benchmarks is uncertain except for one thing: IBOR rates will be coming to an end in the next two years; and banks, companies and investors need to be ready. Rocked by a rate-rigging scandal and latterly by the absence of an underlying market, regulators have called time on IBOR rates and are pushing the world towards more robust alternatives.
This course examines the role IBOR rates have played in finance, growing from almost nothing 40 years ago to one of the most important numbers in world markets; a number that underpins 100s of trillions of USD of cash and derivative contracts.
On day one we look at the role of IBOR rates and what requirements their replacements need to satisfy, before examining the details of the regulatory-approved replacements - 'the risk-free rates (RFRs)'. We then consider the transition process that must be undertaken by banks, companies and investors to meet the regulators deadlines to be ready for the end of IBOR. Day one finishes with a look at the new RFR-linked bonds - how the bonds work and how they have been received by the market.
Day two starts by looking at the role of IBOR in corporate lending, and how the transition to RFR-linked loans might work. We consider the tricky subject of a forward-looking RFR rate and how one might be determined. We then progress to the world of derivatives and the details, and pricing, of the new RFR-linked futures and swaps markets.
We finish the course by considering the process of migrating legacy IBOR deals to RFR-linked terms - the contractual considerations and how we agree a fair transition price. We examine the latest ISDA consultation results and discuss the likely calculation process for fallback rates for legacy interest rate derivatives, as well as the P/L consequences.
Who should attend?
Corporate bankers - relationship managers and treasury managers.
Bank money market, bond and derivative traders and salespeople.
Investors - institutional investors, fund managers, private traders.
Company treasury managers and staff, accountants, risk managers.
The course consists of classroom-based training which combines formal teaching of concepts and technical content, with individual and group exercises to reinforce learning points.
Thursday, March 26
09.00 - 09.10 Welcome and Introduction
09.10 - 12.30
IBOR and its replacement 'Risk-Free Rates' (RFRs)
What was the original purpose of IBOR?
How is it set?
What went wrong?
The necessity for replacement
Would a synthetic IBOR work?
How might it be calculated?
What problems should a replacement rate fix?
The regulatory pressure for replacement
UK FCA position on LIBOR
European Benchmarks Regulation (BMR)
US Alternative Reference Rates Committee (ARRC)
What regulatory tests does a new reference rate need to pass?
Can IBOR be replaced exactly?
Compromises necessary for replacement rate to be widely used