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A Guide to IBOR Transition
March 2021
By the end of 2021, the London Interbank Offered Rate (LIBOR), for long the world’s most widely used benchmark interest rate, will have been phased out as markets transition to LIBOR alternatives. This Guide to IBOR Transition sets out, why this change became necessary, the new breed of risk-free rates (RFRs) and the path to transition
After four decades as a widely-used interest rate benchmark for financial products ranging from bonds and loans to derivatives and mortgage-backed securities, the end of LIBOR is now only months away.
On 5 March 2021, the Financial Conduct Authority, having been notified by ICE Benchmark Administration (the LIBOR administrator), announced that they will cease publication of all Sterling (GBP), Euro (EUR), Swiss Franc (SFR) and Japanese Yen (JPY) LIBOR settings at the end of 2021, as well as one-week and two-month USD LIBOR settings. Other USD LIBOR settings will continue to be published until 30 June 2023.
LIBOR’s approaching demise has promoted efforts to adopt a variety of alternative reference rates, including specially developed risk-free rates (RFRs). This Guide to IBOR Transition details the market developments so far and offers some practical guidance to create a successful transition roadmap for the remainder of the journey.
“The message for anyone impacted by the discontinuation of LIBOR is to be prepared”, says David McNally, IBOR Transition Director for Corporate Banking, Deutsche Bank.
This Guide is intended to help prepare the reader for the journey away from using LIBORs, focussing on the following topics:
- Background to inter-bank lending market
- IBOR reform
- Transition arrangements
- Recent market activity
- Deutsche Bank market activity
- Glossary
David McNally
IBOR Transition Director for Corporate Bank, Deutsche Bank
Here is an extract from Chapter 2: IBOR reform
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