Background of the regulatory changes

In 2018, the regulators of 5 jurisdictions and currencies (USA, UK, Europe, Switzerland and Japan) have come to an agreement to reform the publication of their benchmarks and terminate the fixing of their respective IBOR by December 2021. United Arab Bank (UAB) intends to inform and relay to you the information published by the international authorities.

What are the IBOR rates?

IBOR stands for Interbank Offered Rates. The most commonly used globally is the USD LIBOR.

The IBORs are benchmark rates that represent the average financing cost representative of a country’s banking industry. They are published on a daily basis, in a variety of tenors from overnight to 12 months.

We at UAB, our customers and partners apply the benchmarks in some of our financial products (loans, deposits and other financial transactions).

Why the IBOR rates are changing?

Since 2013, a major benchmark reform has been initiated by global regulators in order to:

• Terminate the publication and utilization of the IBOR benchmarks,
• Publish and use new benchmarks, generally identified as Risk Free Reference Rates (RFR).

According to the Financial Conduct Authority announcement dated March 5th 2021, IBOR benchmarks will cease as set out in their public release.

When are benchmark rates changing?

IBOR panel banks will no longer be obliged to quote a rate daily and IBOR benchmarks will eventually not be published,

       -   after December 31st 2021, for all Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings; the 1 week and 2 month US Dollar settings.

       -   after June 30th 2023, for all other US Dollar settings (Overnight, 1 month, 3 month, 6 month and 12 month).

Further consultations are being conducted by the Financial Conduct Authority at the time of writing*.

IBOR replacements: RFR

New alternative Risk Free Reference Rates (RFR) are available as described in the table below. For example, the USD SOFR has been quoted daily in since April, 2nd 2018.

What are the new benchmarks names and country of origin?

Other countries have started publishing data about their specific RFR. Please consult your advisor for any recommendation you may require.

What are the main differences between IBOR and RFR?

Does this change impact the Emirates Inter-Bank Offered Rate (EIBOR)

Please note that EIBOR or any of the United Arab Emirates benchmark rates are out of scope of the IBOR transition, at the time of writing*. We invite you to visit the Central Bank of the UAE website for any information and updates concerning changes to the EIBOR benchmark.

What do our impacted customers and partners need to do?

• We strongly invite you to consult an advisor appointed by your own organization to assess your need to be involved in the IBOR transition and to review its potential impact on your business.

Keywords: IBOR Transition, RFR, 31 December 2021

• Familiarize yourselves with the official sources, links are provided to you in this page to help but you may use your own sources.

Keywords: FCA (Financial Conduct Authority), LMA (Loan Market Association), Bloomberg

• Review your past transactions and the content of the pricing with regards to the benchmarks that are used and the potential financial impact you may or may not incur.

Keywords: Trade Confirmations, Credit Facility Term Sheet, Fallback, Credit spread adjustment

• Review the legal documentations that your organization has signed in the past that may refer to the reformed benchmarks their fallback rates and their calculations.

Keywords: ISDA protocol, CSA (Credit Support Annex), GMRA (Global Master Repurchase Agreement), ISDA Supplement, 2006 Definitions

* Page updated on 5 April 2021

Disclaimer

UAB does not accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to benchmark rates such as IBORs or any alternative rate including, without limitation, whether the composition or characteristics of any alternative rate will be similar to, or produce the same value or economic equivalence as, the original benchmark rates (including IBORs) or whether any alternative rate will have the same volume or liquidity as the original benchmark rate prior to its discontinuance or unavailability. Except where we otherwise agree with you in writing, UAB does not provide advice, or recommendations on the suitability of your product choice or financing solution. You should consider whether you need to obtain professional independent advice (legal, financial or otherwise), prior to entering into any agreement or investing in a product which references a benchmark rate such as an IBOR. UAB does not owe you any duties or have any liability to you in relation to its management of the transition from IBOR benchmark rates to alternative rates. UAB is not under an obligation to update the information in this explanation and general risk warning.