Sba Master Agreement

In order to support and facilitate the transition from LIBOR to risk-free interest rates, the SBA has today developed and published two documents, the Reference Association Agreement and the Supplementary Interest Council, the Risk Free Council and the EONIA Definitions. By signing the Amendment Agreement benchmark, counterparties incorporate the standard redemption clauses of the International Swaps and Derivatives Association`s (ISDA) IBOR Fallbacks Protocol for their ongoing transactions under the SMA. The expected end of LIBOR, i.e. at the end of 2021, is approaching. Alternative interest rates, called risk-free interest rates, were established as new standard market rates for different currencies; z.B. SARON will replace the CHF LIBOR. Open derivatives transactions that relate to LIBOR and are due after the end of LIBOR (facility transactions) must be converted at risk-free interest rates. Such a transition may be possible, for example: by renegotiating the transaction in question at an early stage or by granting robust back fallback clauses that facilitate the transition after the removal of LIBOR. Both approaches were recommended by FINMA in its guidance 08/2020 on the replacement of LIBOR for derivatives. The same case return clauses are incorporated into new LIBOR transactions by referring to the additional definitions in the transaction document. In addition, the additional definitions contain the definitions necessary to be able to conclude transactions relating to EONIA and risk-free interest rates. Thus, counterparties entering into the benchmark review agreement ensure that their existing LIBOR transactions are converted at risk-free interest rates, in accordance with international standards and the IAIS recommendation.

The same applies to new transactions by referring to the additional definitions in the relevant transaction document. The SBA recommends that all market participants use these new documents in the future. The documents are available free of charge at the link below. Language versions in German, French and Italian as well as a FAQ will be available soon….