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About IBOR Transition
(Conventional Products)

This explanation and general risk warning is provided for customers of First Abu Dhabi Bank PJSC and each of its affiliates (collectively,'FAB') who may have a conventional product or agreement which uses the London Interbank Offered Rate ('LIBOR') or another inter-bank offered rate (together with LIBOR, the 'IBORs') as a benchmark rate.

This explanation and general risk warning is provided for information purposes only and is subject to change. This explanation and general risk warning is indicative only and not binding. Where information in this explanation and general risk warning has been obtained from third party sources, we believe those sources to be reliable, but we do not guarantee the information’s accuracy, and you should note that it may be incomplete or condensed.

What are benchmarks?

In general terms, a benchmark rate is a published reference rate against which payments, accruals or other rates applicable under a transaction are calculated. How FAB uses an IBOR in your product or agreement will depend on the nature of that product, and its relevant terms and conditions.

IBORs are used for many types of financial transactions. For example, a floating rate loan may use an IBOR as a benchmark for calculating the amount of interest that is payable by the borrower. In more complex financial transactions, a swap may use an IBOR, or other rates that are derived from IBOR, to calculate the payments which the parties may need to pay to each other.

Benchmark reform

LIBOR and other IBORs are currently the focus of international and national reforms. The UK Financial Conduct Authority (‘FCA’), which regulates LIBOR, has stated that it will no longer compel banks to submit rates for the calculation of LIBOR after the end of 2021. The US Federal Reserve and other regulators have also taken measures to move markets away from IBORs within set timelines. As a result, the continuation of LIBOR and other IBORs on their current basis cannot be guaranteed after 31 December 2021.

These reforms may result in: (i) changes to the rules or methodologies used in calculating benchmark rates; (ii) restrictions on the use of benchmark rates; and/or (iii) discontinuance of benchmark rates. Even if certain benchmark rates might continue to be published, changes to their methodology, or restrictions on use, may mean that they are no longer representative of the underlying market and economic reality that the benchmark rate was originally intended measure or otherwise become no longer appropriate for products or agreements that customers have entered into with FAB.

FAB is not currently aware of any forthcoming changes to the Emirates Interbank Offered Rate administered by the Central Bank of the United Arab Emirates, which is also an IBOR and more commonly referred to as "EBOR" or "EIBOR". The Central Bank of the United Arab Emirates may in the future mandate reforms to this benchmark rate, and advance notice of the timing or nature of such changes may not be available to market participants.

Benchmark fallback arrangements including alternative rates

If benchmark rates such as IBORs are discontinued or otherwise become unavailable, or stop being appropriate for use in a product or agreement, then interest rates and other provisions which reference the benchmark will be determined using fallback arrangements (if any) set out in the relevant agreement.

The fallback arrangements that apply will depend on the terms set out in the relevant agreement. They may allow the affected benchmark to be replaced by alternative rates, such as using the rate published for the original benchmark for the last preceding calculation period; published quotations provided by reference banks; a specified successor rate, which may be a fixed rate; or another alternative benchmark that is generally accepted in the market as the appropriate successor to the original benchmark. Additionally, an adjustment spread may be applied to the alternative rate, for example to produce an industry-accepted replacement rate for the original benchmark.

FAB may also make other technical, administrative or operational changes to products or agreements to reflect the adoption and implementation of an alternative rate, including changes to the timing and frequency of determining rates and making interest payments.

Potential impact on agreements between you and FAB

The operation of the alternative rate and any adjustment spread may result in products or agreements performing differently than if the original benchmark rate had continued to apply. This could include paying a higher or lower rate of interest, differences to related tax or hedge accounting issues, resulting mismatches with other transactions that you may have entered into, as well as other possible effects.

You should consider now, and continue to review, the potential impact and risks of any future changes to benchmark rates for products and agreements between you and FAB. These may include, depending on the product:

  • Fallback arrangements under the relevant agreement(s) becoming operative, which may change the rate used to calculate amounts that you pay or amounts that might be paid to you;
  • Amendments to the calculation of amounts payable, which may change the rate of interest that you pay or amounts that might be paid to you;
  • Consequential changes to other provisions, such as the amount of margin that is payable and changes to associated fees and charges;
  • Practical implications, such as changes to systems and accounting practices;
  • A mismatch between products that, by virtue of transition to an alternative rate, cease to be linked to the same underlying benchmark rate. This could, for example, affect hedging agreements associated with a facility.

This is not an exhaustive list and there are likely to be other factors for you to consider without reliance upon FAB. We recommend that you keep up to date with the latest developments in relation to the changes and the potential alternative benchmark rates that may be relevant to you.

Further information

For further information in relation to the transition away from LIBORs, including anticipated timeframes, please refer to the table below for details of the relevant LIBOR transition working group:

LIBOR Relevant Transition Working Group Website
Sterling LIBOR Bank of England and FCA working group
US Dollar LIBOR Federal Reserve Alternative Reference Rates Committee
EURIBOR and EONIA European Central Bank working group
JPY LIBOR and JPY TIBOR Bank of Japan cross-industry committee on Japanese yen interest rate benchmarks
CHF LIBOR Swiss National Bank working group on Swiss franc reference rates

If you wish to discuss this further with us, please contact your FAB Relationship Manager or use one of the channels detailed here.

This communication does not deal with every important topic pertaining to LIBOR transition. It is not designed to provide legal, financial or other advice. By reviewing this communication, you agree that First Abu Dhabi Bank and each of its affiliates (collectively,'FAB') is not acting as your advisor and is not providing advice or making any recommendation regarding LIBOR transition; it being understood that any information or explanations pertaining to LIBOR transition provided via this communication shall not be considered advice or a recommendation. Each recipient of this communication will make its own independent decisions regarding LIBOR transition, based upon its own judgement and upon advice from such advisors as it has deemed necessary. This communication should be read in conjunction with IBOR Transition.

FAB does not accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to benchmark rates such as IBORs or any alternative rate including, without limitation, whether the composition or characteristics of any alternative rate will be similar to, or produce the same value or economic equivalence as, the original benchmark rates (including IBORs) or whether any alternative rate will have the same volume or liquidity as the original benchmark rate prior to its discontinuance or unavailability.

Except where we otherwise agree with you in writing, FAB does not provide advice, or recommendations on the suitability of your product choice or financing solution. You should consider whether you need to obtain professional independent advice (legal, financial or otherwise), prior to entering into any agreement or investing in a product which references a benchmark rate such as an IBOR. FAB does not owe you any duties or have any liability to you in relation to its management of the transition from IBOR benchmark rates to alternative rates. FAB is not under an obligation to update the information in this explanation and general risk warning.


First Abu Dhabi Bank

First Abu Dhabi Bank P.J.S.C

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