IBOR transition

One of the biggest changes to financial markets of the last decade is taking place with the move from IBORs (Interbank Offered Rates) to RFRs (alternative Risk-Free Rates).

Please refer to the information below, as well as the sections dedicated to Institutional, Corporate and Private clients.

Overview of IBOR transition

Quick guideIn more depth

IBORs are interest rate benchmarks based on the rate at which banks will lend to each other on an unsecured basis. The interbank unsecured lending market that IBORs seek to represent has shrunk substantially, leading to concerns that they pose a systemic risk. Risk Free Rates (RFRs) are overnight rates, which can be used as alternative benchmarks for IBORs. RFRs provide robust and credible overnight reference rates, well suited for many purposes and market needs. Both cash and derivatives markets are transitioning to utilise RFRs as primary benchmarks.

Following cessation of 24 LIBOR (London Interbank Offered Rate) settings as-of end 2021 (read FCA announcement), industry focus is now on transition of the US dollar LIBOR settings that cease after 30 June 2023.

The LIBOR settings that have ended are:

  • all euro and Swiss franc LIBOR settings
  • overnight / spot next, 1-week, 2-month and 12-month sterling and Japanese yen LIBOR settings
  • 1m, 3m and 6m GBP and JPY LIBOR settings for anything other than temporary usage for tough legacy positions
  • 1-week and 2-month US dollar LIBOR settings.

The EONIA (Euro Overnight Index Average) benchmark was also discontinued on 3 January 2022.

The 1-, 3- and 6-month sterling and Japanese yen LIBOR settings are being published on a synthetic basis, using the forward-looking term rate plus the ISDA spread, and do not rely on submissions from panel banks. Synthetic yen LIBOR will cease at the end of 2022, and availability of synthetic sterling LIBOR is not guaranteed beyond end-2022.

The Financial Conduct Authority (FCA) published a Notice allowing use of these synthetic rates in all legacy contracts except cleared derivatives. New use of synthetic LIBOR is banned.

The remaining five US dollar LIBOR settings will continue to be calculated using panel bank submissions until mid-2023. However, new use of US dollar LIBOR is also now banned, with limited exceptions (read the statement by U.S. regulators and the Financial Conduct Authority (FCA) guidance (1.17 on page 5).

Clients are encouraged to reach out to their Deutsche Bank representative to discuss how IBOR transition will impact them. Alternatively, please email our dedicated team at IBORtransition@db.com.