The Working Group on Sterling Risk-Free Reference Rates’ paper on the transition of structured notes away from GBP Libor provides practical steps for market participants seeking to transition notes with a derivative component.
The paper also contains feedback from the UK Structured Products Association (UK SPA) and the Bond Market Sub-Group. For new business, the paper suggests overnight Sonia, compounded in arrears, as a potentially suitable alternative rate and offers considerations around calculation conventions. For the transition of legacy products, it stressed the need for engagement between product manufacturers and distributors, ‘especially where consent solicitation may be necessary to transition a pro
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