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ARTICLE · 12 APRIL 2018

FCA Says LIBOR Transition Won't Subject Legacy Swaps To Margin Rules

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According to reports, the UK Financial Conduct Authority ("FCA") does not believe that moving a legacy swap contract from LIBOR to an alternative reference rate would represent a material amendment...

United KingdomFinance and Banking
Lary Stromfeld
Lary Stromfeld
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According to reports, the UK Financial Conduct Authority ("FCA") does not believe that moving a legacy swap contract from LIBOR to an alternative reference rate would represent a material amendment to the contract, and thus would not "trigger application of margin requirements."

A material amendment to a contract could cause it to be classified as a new trade, which would require a firm to adhere to both initial and variation margin requirements. The FCA's reported assessment - that altering the reference rate will not represent a material amendment - resolves uncertainty around whether legacy swap contracts will be subjected to the new European Market Infrastructure Regulation margin requirements.

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