FAQ on Products

These FAQ are provided by the NWG for information purposes only. They are merely intended as an information resource to assist market participants. No representation is made as to their completeness, accuracy or appropriateness for any purpose.

  • Mortgages

    New Products (SARON)

    • Feb 2019: 7 options for using compounded SARON were identified (page 35 of 79, i.e. slide 23).
    • Nov 2019: Based on market trends and discussions with the WEKO, the focus was narrowed down to 3 options (page 31 of 86, i.e. slide 31).
    • Jul 2021: The NWG recommended that the option Last Recent and the SARON 1M Compound Rate are also considered.

    Legacy Products (CHF LIBOR)

    • Oct 2018: Homburger, a Swiss corporate law firm, presented a draft fallback template for retail loans under Swiss law. The template can serve as an example for fallback language. Market participants must decide whether and how they implement a fallback clause in retail loan contracts.
    • May 2020: More clarity was provided on the fallback design of CHF products (page 67 of 80, i.e. slide 56).
    • Sep 2020: Homburger confirmed that cessation and pre-cessation are included in its fallback template. Moreover, compounded SARON plus ISDA’s spread adjustment can be used as the fallback rate. In order to simplify the fallback, and as long as it is in the customer’s favour, compounded SARON may also be used without a spread. Compounded SARON can be calculated by using the option Plain, Lookback or Last Reset, for example. To simplify matters, the standardised SARON Compound Rates provided by SIX Index Ltd (e.g. the SARON 1M Compound Rate) can be used.
    • Jul 2021: The NWG recommended using compounded SARON and, should a spread adjustment be applied, using CHF ISDA spreads as a reference point for a fallback rate for CHF LIBOR for all types of products if no other fallback rate is specified.
    • Jul 2021: If the fallback rate needs to be known in advance and no other fallback rate is specified, the NWG recommends considering the Last Recent option and the SARON 1M Compound Rate for compounded SARON in the fallback methodology. Thus, for a fallback rate for CHF 6M LIBOR, for example, the recommendation – if no other fallback rate is specified and the fallback rate needs to be known in advance – is to consider the SARON 1M Compound Rate in advance and the CHF 6M ISDA spread as a fallback rate for CHF 6M LIBOR.
  • Corporate loans (bilateral) and SME loans (domestic)

    New Products (SARON)

    • May 2020: Guidance was given on how to use compounded SARON for new corporate lending – e.g. fixed advances and overdrafts. For fixed advances, an internal rate based approach was deemed reasonable. If a benchmark needs to be used, a compounded SARON in arrears seems reasonable. In case of daily changes of the notional amount, a daily reference rate should also be used – e.g. internal rates or SARON (page 34 of 80, i.e. slide 23).

    Legacy Products (CHF LIBOR)

    • Sep 2020: Homburger confirmed that the same fallback template can also be used for corporate loans (bilateral) and SME loans (domestic).
    • Jul 2021: The NWG recommended using compounded SARON and, should a spread adjustment be applied, using CHF ISDA spreads as a reference point for a fallback rate for CHF LIBOR for all types of products if no other fallback rate is specified.
    • Jul 2021: If the fallback rate needs to be known in advance and no other fallback rate is specified, the NWG recommends considering the Last Recent option and the SARON 1M Compound Rate for compounded SARON in the fallback methodology. Thus, for a fallback rate for CHF 6M LIBOR, for example, the recommendation – if no other fallback rate is specified and the fallback rate needs to be known in advance – is to consider the SARON 1M Compound Rate in advance and the CHF 6M ISDA spread as a fallback rate for CHF 6M LIBOR.
  • Syndicated loans

    New Products (SARON)

    • May 2020: For syndicated loans in the Swiss market, the option Lookback (with an observation shift of up to 5 business days) was proposed (page 33 of 80, i.e. slide 22).
    • Sep 2020: The NWG repeated the recommendations to use the 'shift' methodology and to floor the compounded SARON, as long as the focus is on the domestic market. If international consistency is important, the 'lag' methodology and flooring individual SARON values are viable alternatives. 

    Legacy Products (CHF LIBOR)

    • Oct 2019: The LMA exposure draft reference rate selection agreement is to be used in relation to legacy transactions. Note that this involves the use of a two-stage process which parties need to consider carefully, as a one-step amendment process may be more appropriate, depending on the circumstances.
    • Aug 2020: The LMA published a supplement to its revised replacement of the screen rate clause to provide an agreed process for the renegotiation of refinanced legacy transactions.
    • Sep 2020: The LMA published an exposure draft multicurrency rate switch facility agreement. This allows parties to build in a switch mechanism from CHF LIBOR to compounded SARON.
    • Feb 2021: The proposed ‘Rate Switch Amendment Agreement’ for syndicated loans, which is based on the recommended standard for the Swiss market (i.e. Lookback with observation 'shift' and 'lag' as alternatives, compounded SARON, and a floor for compounded SARON if a floor is included) was published on the NWG’s webpage.
  • Trade finance

    • Jul 2021: The NWG recommended the use of either the Last Recent SARON 1M Compound Rate or – e.g. for sophisticated institutions – Cost of Funds based on the individual weighting of the need for a public benchmark vs. the need for hedgeability.
  • Intercompany loans

    • Jul 2021: The NWG recommended considering the option Last Recent and the SARON 1M Compound Rate for intercompany loans in CHF.
  • FRN

    New Products (SARON)

    • Jun 2019: The option Lookback with an offset of 3 to 5 business days was recommended.

    Legacy Products (CHF LIBOR)

    • Sep 2020: In the absence of robust fallback language, a consent consultation may be required.
    • Feb 2021: For CHF hybrid bonds with a reset date beyond 2021, the NWG recommended using the SARON swap rate (e.g. 5Y) + ISDA’s adjustment spread in case of reference to a swap rate (e.g. 5Y) with CHF LIBOR as a reference rate. In case of direct reference to CHF LIBOR, compounded SARON + ISDA’s adjustment spread should be used.
  • Bonds (fixed rate)

    • Jul 2021: The NWG recommended that all market participants (investors and issuers) switch to the SARON swap curve as the only pricing reference starting at the latest 1 September 2021.
  • Swaps

    New Products (SARON)

    • Jan 2017: A term sheet for SARON OIS was presented. It is based on the option Payment Delay using 2 business days.
    • Jul 2021: The NWG recommended using only SARON-based derivatives for new transactions starting from 1 July 2021, excluding transactions that reduce or hedge LIBOR exposures.

    Legacy Products (CHF LIBOR)

    • Generally covered by ISDA/SMA, otherwise they must be negotiated bilaterally.
  • CCBS

    New Products (SARON)

    • May 2020: A term sheet for SARON SOFR CCBS was presented. It is based on the option Payment Delay using 2 business days. This term sheet can also serve as a template for other SARON RFR CCBS.
    • Feb 2021: The NWG recommended starting RFR-based USD/CHF CCBS ahead of end-2021.
    • Jul 2021: The NWG supported both dates that had been discussed internationally – 7 and 21 September 2021 – as start dates for switching quoting conventions for cross-currency swaps in all five LIBOR currencies to RFR (i.e. SOFR, SONIA, TONA, €STR and SARON). On 21 July 2021, the Alternative Reference Rates Committee (ARRC) endorsed the Commodity Futures Trading Commission Market Risk Advisory Committee (MRAC) recommendation that interdealer trading conventions for CCBS between USD, JPY, GBP and CHF LIBOR move to each currency’s RFR as of 21 September 2021.

    Legacy Products (CHF LIBOR)

    • Feb 2021: The NWG recommended considering a renegotiation of remaining LIBOR-based into RFR-based USD/CHF CCBS ahead of end-2021.
  • Futures

    New Products (SARON)

    • Jun 2018: A term sheet for 3M SARON Futures was published. It is based on the option Payment Delay using 2 business days.

    Legacy Products (CHF LIBOR)

    • The terms of the relevant exchanges apply.
  • Caps and Floors

    New Products (SARON)

    • Nov 2019: A term sheet for SARON-based Caps and Floors was presented. It is based on the option Payment Delay using 2 business days.

    Legacy Products (CHF LIBOR)

    • Generally covered by ISDA/SMA, otherwise they must be negotiated bilaterally.