DOJ Completes Review of ISDA IBOR Fallbacks
The DOJ's Antitrust Division (the "Division") concluded a review of ISDA form amendments to provide for fallbacks to interbank offered rates ("IBORs").
The Division found that that the proposed amendments are unlikely to harm competition "based on the representations in ISDA's letter request, including its description of certain safeguards," such as making the selection of fallback rates voluntary.
As ISDA previously noted, ISDA's launch of the IBOR Fallbacks Protocol and IBOR Fallbacks Supplement is contingent on receiving a positive business review letter from the DOJ. Assistant Attorney General Makan Delrahim said: "ISDA's process, including its cooperation with government regulators and its consultation-driven process for obtaining feedback from industry participants, has had the effect of clarifying the practical issues involved in planning for when LIBOR and other IBORs are no longer available and preparing for a smooth transition away from IBORs to other reference rates."
The DOJ reserves the right to challenge the proposed action if the actual operation proves to be anticompetitive in purpose or effect.
Commentary
The DOJ review is a long-awaited and crucial step for benchmark transition. (The terms for ISDA's fallbacks and the related protocol have been essentially final for quite some time.) ISDA has long indicated that IBOR fallbacks are expected to be published soon after receipt of a letter of this type from the DOJ. The timing of the letter keeps ISDA on pace for the expected effective date of late January 2021.