ISDA has published the following statement in response to today’s announcement by the Bank of Israel (BOI) on the future cessation of all TELBOR tenors.
“Today’s announcement constitutes an index cessation event under the 2021 ISDA Interest Rate Derivatives Definitions and the November 2022 Benchmarks Module to the ISDA 2021 Fallbacks Protocol. As a result, the fallback spread adjustment published by Bloomberg is fixed as of the date of the announcement for all TELBOR settings.
“The BOI specifically announced that publication of all TELBOR tenors will permanently cease immediately after final publication on June 30, 2025. From that point, fallbacks (to the adjusted risk-free rate plus spread) will automatically apply for outstanding TELBOR derivatives contracts that incorporate Version 7.0 onwards of the 2021 ISDA Interest Rate Derivatives Definitions or in respect of which both parties have adhered to the November 2022 Benchmarks Module to the ISDA 2021 Fallbacks Protocol.
“For outstanding TELBOR derivatives contracts that incorporate Versions 1.0 to 6.0 of the 2021 ISDA Interest Rate Derivatives Definitions and are not amended by the November 2022 Benchmarks Module to the ISDA 2021 Fallbacks Protocol, the Generic Fallback Provisions will apply and, under the Generic Fallback Provisions, the parties will seek to apply the first Alternative Continuation Fallback pursuant to which a Continuation Amendment can be made. Pursuant to the direction of the ‘Telbor committee’ (established by the BOI in 2007), the recommendation for derivatives is to use compounded SHIR plus the adjustment spread published by Bloomberg, although parties may have agreed an alternative outcome.
“The November 2022 Benchmarks Module to the ISDA 2021 Fallbacks Protocol, which incorporates the fallbacks into legacy non-cleared derivatives trades with other counterparties that choose to adhere to the protocol, remains open for adherence on the ISDA website.”
This statement is for information purposes only. It does not constitute legal advice and should not be considered an explanation of all relevant issues. You should consult your legal advisors and any other advisor you deem appropriate in considering the issues discussed herein.
For additional information on benchmark reform, including the operation of derivatives fallbacks, visit ISDA’s benchmark reform and transition from LIBOR page on the ISDA website.
