IBOR Benchmark Transition

IBOR Benchmark Transition


What is IBOR?

Interbank Offered Rates (IBORs), including the London Interbank Offered Rate (LIBOR), serve as widely accepted benchmark interest rates that represent the cost of short-term, unsecured, wholesale borrowing by large globally active banks. A group of banks submits rates on a daily basis, which are averaged and published for a variety of currencies and tenors.

Historically, IBORs have grown in relevance, with some estimates suggesting they serve as interest rate benchmarks for over $350 trillion in financial products, including bonds, derivatives mortgages and other loans. IBORs are used by financial institutions, corporations and governments, as well as retail market participants. IBORs are used not only as benchmarks in financial contracts, but also often as the basis for valuations.

What is the IBOR Transition?

In 2013, the G20 asked the Financial Stability Board (FSB) to undertake a fundamental review of major interest rate benchmarks. This work led to the recognition that even after reforms that strengthened the underlying processes, certain risks relating to robustness and reliability of IBORs could not be fully addressed. Notably, structural shifts in the way major banks funded their operations had led to declining transaction volume in the markets that underpin IBORs.

In 2017, the Financial Conduct Authority (FCA; the UK body that regulates LIBOR) declared that after 31 December 2021 it will no longer compel banks to continue making LIBOR submissions. The FCA's statement triggered what is now known as the IBOR Transition, a multi-year process of phasing out (L)IBOR rates and reliance on those in legacy and new transactions. As of 31 December 2021 ICE Benchmark Administration (IBA) has ceased publication, on a representative basis, of the GBP, EUR, CHF, and JPY fixings, as well as the 1 week and 2 month USD LIBOR, and will cease publication of the other USD LIBOR fixings (overnight, 1 month, 3 months, 6 months, and 12 months) at the end of June 2023. See the section below entitled "What are the key regulatory and industry milestones globally, and for each jurisdiction" for further details on LIBOR cessation timelines.

Note that certain non-LIBOR IBOR rates, such as EURIBOR and JPY TIBOR, are not expected to cease publication in the near term.

What will IBOR be replaced with?

The first step towards the IBOR Transition was the designation of Alternative Reference Rates (ARRs) which have been slated to replace certain IBORs. Industry groups comprising public and private sector representatives across jurisdictions have identified these replacement benchmarks, and consultations are on-going to establish new conventions and transition approaches.

  • What is known about the ARRs across jurisdictions?

  • What are the core differences between IBORs and ARRs?

  • How will interest be calculated in ARR-linked transactions?

  • How will IBOR-linked transactions be affected by the IBOR Transition?

  • What are the key regulatory and industry milestones globally, and for each jurisdiction?

  • Who is driving the industry transition?

  • What is the timeline for the IBOR Transition?

  • What is Credit Suisse's Transition approach?

  • I'm a Credit Suisse client. How will the IBOR Transition impact me?

  • How can I find out more?

  • Additional Resources For Swiss Clients

The content of this page reflects Credit Suisse's current understanding of the IBOR Transition. Please note that the overview provided here is not meant to be complete nor exhaustive and does not constitute advice or recommendation. Credit Suisse will seek to update this page periodically as market developments occur and industry announcements are made.