IBOR Transition

Daiwa IBOR Transition

Interbank Offered Rates (“IBORs”), including the London Interbank Offered Rate (“LIBOR”), are widely used for determining interest rates in relation to a wide range of financial products such as derivatives, bonds, loans, structured products and mortgages.

The Financial Conduct Authority (“FCA”) has stated that after 2021 it will no longer compel banks to make submission of certain rates used for the calculation of LIBOR. Globally, regulators are encouraging firms to transition from the use of IBOR’s to alternative reference rates. Please see below selected references* if you would like more general information on interest rate reform and IBOR transition.

An FCA announcement on 5th March 2021 confirmed that all 35 LIBOR settings will either cease to be provided by any administrator or no longer be representative:

  • Immediately after 31st  December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and
  • Immediately after 30th June 2023, in the case of the remaining US dollar settings.

Daiwa has an established cross-divisional and cross-functional change program to assess and address the impact of the IBOR transition on our processes, systems, documentation, product and service offering. Daiwa has already conducted a number of outreach programmes to develop our discussions with our counterparties on the specifics of any relevant open transactions, for instance where we may need to modify the reference rate-linked provisions in such transactions, which would raise remediation points to be agreed with our counterparties including in relation to commercial, operational and legal matters. See below for further details regarding ISDA IBOR Fallbacks Protocol (the “Protocol”).

ISDA IBOR Fallbacks Supplement and Protocol

Following publication of the ISDA IBOR Fallbacks Supplement (the “Supplement”) and Protocol on 23rd October 2020, Daiwa Capital Markets Europe Limited and our parent Daiwa Securities Co. Ltd. have already adhered to the Protocol. Please see below selected references** if you would like more general information on the Protocol.

A communication was sent in December 2020 to all counterparties that may have one or more contracts with Daiwa Capital Markets Europe Limited falling within the scope of the Protocol. We are encouraging our clients to also adhere to the Protocol to mitigate potential legal and/or economic consequences associated with the cessation of IBOR rates.


  • Regulators are promoting industrywide timely adherence to the Protocol which incorporates industry-agreed fallback rate provisions into certain in-scope legacy contracts.
  • If market participants do not adhere to the Protocol (or do not adopt the provisions through a bilateral negotiation) then existing contracts will remain under the existing contractual fallback provisions, which when drafted, may not have foreseen a permanent cessation of IBOR.
  • All new contracts that incorporate the 2006 ISDA Definitions and that are entered into on or after the 25 January 2021 will include the triggers and fallbacks set out in the 2006 ISDA Definitions as amended by the Supplement. Parties will not need to take any additional steps to include the new fallbacks when entering into new derivative transactions that incorporate the 2006 ISDA Definitions after 25 January 2021.

Impact on Existing Transactions

  • The Supplement came into effect on 25 January 2021. Adherence to the Protocol incorporates the Supplement into legacy, in-scope IBOR-based uncleared derivatives and certain agreement types dated prior to the Protocol effective date on 25 January 2021.
  • Where both counterparties have adhered to the Protocol prior to the 25 January 2021, the new contractual fallback provisions will become effective for existing in-scope contracts from 25 January 2021.

Where one or both counterparties adhere to the Protocol after 25 January 2021, the new contractual fallback provisions will become effective for existing in-scope contracts on the date the second counterparty adheres.

If you have any questions of Daiwa Capital Markets Europe Limited, we would be grateful if you could contact your regular Daiwa coverage individual or our IBOR Transition team directly at: DCME_IBORTransition@uk.daiwacm.com 


* selected references for general information

Financial Conduct Authority (FCA)

Bank of England (BoE)

International Swaps and Derivatives Association (ISDA)

Financial Stability Board (FSB)


** selected references for ISDA Fallbacks Information