Transitioning from Interbank Offered Rates (IBORs) to new Risk Free Rates (RFRs)* - Global Financial ...
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Transitioning from Interbank Offered Rates
(IBORs) to new Risk Free Rates (RFRs)*
March 2021
In recent years, international and domestic authorities alike have actively These documents have been updated from their previous versions
worked with the private sector to address LIBOR’s shortcomings and to (June 2020) to provide the latest information regarding rates for major
find alternative rates. In 2013, the International Organization of Securities currencies including the Australian dollar, Canadian dollar, Euro, Hong
Commissions (IOSCO) developed an international set of principles Kong dollar, Japanese yen, Singapore dollar, Swiss franc, UK pound
for financial benchmarks. These principles—which include 19 specific sterling and U.S. dollar.
standards across governance, benchmark quality, methodology, and
The information contained herein is based on the work of the FSB
accountability—have emerged as the international standard. IOSCO has
through the OSSG as well as other publicly available information. For
rightly focused on tying benchmarks more closely to observable, arms-
ongoing IBOR transition updates, please reference the individual central
length transactions.
bank working groups:
The Financial Stability Board (FSB) and its members have published
• Japanese yen: Study Group on Risk-Free Reference Rates and the
proposals, plans, and timelines for reference rate reform and have
Bank of Japan Cross-Industry Committee on Japanese Yen Interest
promoted the strengthening of the major interest rate benchmarks. The
Rate Benchmarks
FSB and its members have been carrying out work on the development
and introduction of alternative benchmarks, developing a plan to • Euro: Working Group on Euro Risk-Free Rates
accomplish a transition to new benchmarks, encouraging work by the
private sector on contract robustness, and reporting regularly on the • UK pound sterling: Working Group on Sterling Risk-Free Rates
progress made.
• U.S. dollar: Alternative Reference Rates Committee
To aid in the awareness of the IBOR transition processes impacting
• Swiss franc: National Working Group on Swiss Franc Reference Rates
globally-active financial institutions, the Global Financial Markets
Association (GFMA) has created the following documents outlining the ustralian dollar: Reserve Bank of Australia Market Operations Resources
• A
various parts and players. This information is organized into the enclosed
four products: • Canadian dollar: Canadian Alternative Reference Rate Working Group
1. K
ey Timelines and Milestones for the transition from IBORs to RFRs; • Singapore dollar: Steering Committee for SOR Transition to SORA
2. An overview of objectives for completing the transition in 2021;
3. S
napshot of the IBOR and RFR variables associated with each
currency;
4. ‘At a Glance’ Tracker of each official sector working group activities
and near-term expected actions.
*Current as of March 2021
1IBORs to RFRs Transition Timeline
This timeline lists key dates and milestones associated with the transition from IBORs to risk free rates for
the Japanese yen, Euro, UK pound sterling, U.S. dollar, Swiss franc, Australian dollar, Canadian dollar, Hong
Kong dollar and Singapore dollar.
EMMI announces ECB publishes summary of EMMI receives license for the ABS, SFEMC, and SC-STS publish The FCA announces future cessation
end to efforts on responses for the third public administration of Euribor from response to feedback on SGD and loss of representativeness of 35
EONIA reform. consultation by the working group the Belgian FSMA interest rate benchmarks consultation LIBOR benchmarks administered by
Selects €STR as on Euro risk-free rates on the ICE and regulated by the FCA
replacement for EONIA to ESTR legal action plan WG Euro RFR Publishes SC-STS publishes SORA
EONIA Recommendations on the Market Compendium: Publication of
Legal Action Plan for Transition HMT published
EMMI concludes Transition from SOR to SORA compounded average
from EONIA to €STR consultation
recalibration of EONIA €STR for 1 week, 1 month,
BoJ publishes on safe
Cash Rate methodology as €STR + ECB publishes €STR 3 months, 6 months and 12
final report harbours
methodology 8.5bp as of October 2019 months tenors
ABS-SFEMC on the results and contract
introduced WG publishes high level
develops of its 2nd continuity Publication of a ‘Beta’
WG publishes responses MAS recommendations for
proposal to consultation on in winding Term SONIA Reference
to Term Sonia Reference establishes fallback provisions in
Recommends strengthen down critical
Rates (TSRR) consultation steerco to contracts for cash products the appropriate Rate for 1,3,6 and 12 month
TONAR be SIBOR based benchmarks
facilitate SOR and derivatives transactions choice and tenors expected by FTSE
calculated by on consultation WG publishes “Next usage of JPY Russell, ICE Benchmark
transition to referencing EURIBOR. Amendments to
BOJ responses Steps” paper on interest rate Administration and Refinitiv
SORA BMR published
development of ABS, SFEMC, and SC-STS benchmarks in OJ
Some TSRR and issuance PRA/FCA publish report announcing EONIA new
EURIBOR of first SONIA-linked issues findings the discontinuation of Term SONIA for 1, 3, 6, business after
tenors cease securitisation [retained of their “Dear enhanced SIBOR and its and 12 month tenors this date must
to exist on balance sheet] CEO” letters. phased transition to SORA. available reference €STR
May Dec Sept July Sept Nov Dec May June July Aug Oct Nov July Oct Nov Jan Feb April June Start of
2020 2020
2016 2016 2016
2017 2017 2018 2018 2018 2018 2018
2019 2019 2019 2019 2019 2019 2019 2020 2020 2021 2021 2021 2021 2021 2022 2022
Oct Apr Oct Mar Q2 April July Dec June July Sept Oct Dec Jan March End of Start of June
2017 2018 2018 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 2021 2021 2021 2022 2023
Fed Final Bank of CME and LCH NY State Legislature US bank regulators
NWG presents a Canada begins complete passes bill to minimize previously
publishes recommendations discussion paper on
SOFR for fallback calculating discounting any potential legal announced probation
SARON floating rate and publishing switch to uncertainty and adverse on use of LIBOR in
Legend contract language notes addressing
for FRNs, bilateral enhanced SOFR economic impacts new transactions by
operational matters CORRA related to the transition YE 2021
JAPAN Recommends Recommends business loans, related to the timely
SARON compounded syndicated determination IBA
NWG announces FCA no longer
E
U SARON as term loans and of interest rate IBA publishes intends
expected CHF LIBOR compels panel
reference rate securitizations payments. consultation on to cease
discontinuation by banks to submit
UK potential LIBOR LIBOR quotes publication
the end of 2021.
cessation of
Australia ARRC releases WGARR IBA intends to remaining
a user guide publishes results Publication ISDA launches ISDA fallbacks cease publication of USD
US for SOFR of consultation on of Bloomberg IBOR fallbacks supplement one week and two LIBOR
Switzerland encouraging refinements for indicative supplement and protocol month USD LIBOR settings
transition HONIA as ARR. fallback rates. and protocol take effect settings and all other
Canada currency settings
G20 publishes LIBOR’s regulator and its
HK BIS releases a FSB publishes communique administrator confirm when LIBOR Transitional provisions of the
primer on the new user guide for reaffirming end-2021 panels will cease. ISDA announces Benchmark Regulation expire.
SG benchmark rates overnight RFRs transition deadline. setting of LIBOR spread adjustments. BMR comes into force
O
ther regulatory
milestones
2Completing the Transition in 2021
This timeline highlights the key mid-year and year-end objectives and milestones published by the Financial
Stability Board (FSB) for all currencies. These milestones are outlined in further detail in the most recent
FSB IBOR Transition Progress Report (published November 2020). We have also provided links to detailed
final year transition plans for Japan, Singapore, Switzerland, the United Kingdom, and the United States1.
Achieving these milestones and completing the transition in 2021 will require coordinated efforts from all
financial market participants, including sell- and buy-side firms, infrastructure vendors, lenders, borrowers, and
financial market infrastructure firms (FMIs). The information captured below is aimed to help clarify the near-
term action items and milestones that all financial market participants should be managing towards.
Firms should have completed a full assessment of their
stock of legacy contracts, have determined which can
be amended in advance of end-2021, and establish
formalized plans to amend contracts in cases where
counterparties agree.
Firms should be fully prepared for LIBOR to cease.
Where LIBOR linked exposure extends beyond end-2021,
firms should make contact with counterparties to discuss All new business should be conducted in alternative
how existing contracts may be impacted and what steps reference rates or be capable of switching to rates with
may be needed to prepare for the use of alternative rates. limited notice.
Start of 2021 Mid-Year 2021 Year-End 2021
Firms should have implemented the necessary system For any “tough legacy” contracts where amendments have
and process changes required to enable the transition to not been possible, the implications of cessation or a lack
alternative rates. of representativeness should have been considered and
discussed between counterparties, and steps should have
been taken to prepare for this outcome as needed. The
Firms should aim to use robust alternative reference rates scope and impact of any steps taken by the official sector
to LIBOR in all new contracts wherever possible. to support these “tough legacy” contracts, if available,
should have been clearly understood and considered.
Where realistic, firms should take steps to execute
formalized plans to convert legacy LIBOR-linked contracts All firm business-critical systems and processes should be
to alternative reference rates in advance of end-2021. conducted without reliance on LIBOR, or be capable of
being changed to run without LIBOR with limited notice.
Please find here links to detailed 2021 transition plans published by Japan,
Singapore, Switzerland, the United Kingdom, and the United States1.
1
The ARRC’s Recommended Best Practices for Completing the Transition from LIBOR
are important milestones even though not issued as supervisory guidance. 3Snapshot: Variables of each IBOR and RFR by Jurisdiction
The following lists out the key factors to be aware of in each IBOR and risk-free reference rate.
Reformed
IBOR include Alternative Alternative RFR Transaction Overnight Secured/ Underlying Rates
Jurisdiction Benchmark IR Administrator
waterfall RFR Administrator based? rate? Unsecured Transactions Published
approach?
JBA TIBOR
JBA TIBOR
EUROYEN Yes Yes
Administration
TIBOR
TONA / Money
Bank of Japan Yes Unsecured July 1985
TIBOR Markets
Japan ICE Benchmark
JPY LIBOR Administration Yes Yes
(IBA)
Euro short-
term rate Yes October
EONIA/ European Money (€STR) European
Yes Money 2019
EURIBOR Markets Institute Yes Central Bank Unsecured
(€STR) Markets (€STR)
(EMMI) (ECB)
EU Reformed
Partly
EURIBOR
Reformed
sterling
ICE Benchmark
overnight Bank of Money 23 April
GBP LIBOR Administration Yes Yes Yes Unsecured
index England Markets 2018
(IBA)
UK average
(SONIA)
Secured Federal
ICE Benchmark
overnight Reserve Bank Repo
USD LIBOR Administration Yes Yes Yes Secured 3 April 2018
financing of New York Transactions
(IBA)
US rate (SOFR) (FRBNY)
Swiss
ICE Benchmark
average rate SIX Swiss Repo 25 August
CHF LIBOR Administration Yes Yes Yes Secured
overnight Exchange Transactions 2009
(IBA)
(SARON)
Switzerland
4Snapshot: Variables of each IBOR and RFR by Jurisdiction
The following lists out the key factors to be aware of in each IBOR and risk-free reference rate.
Reformed
IBOR include Alternative Alternative RFR Transaction Overnight Secured/ Underlying Rates
Jurisdiction Benchmark IR Administrator
waterfall RFR Administrator based? rate? Unsecured Transactions Published
approach?
Australian RBA Cash Reserve Bank Current
Bank Bill Swap Cash Market Methodology
Securities Yes Rate of Australia Yes Yes Unsecured
Rate (BBSW) Transactions Introduced
Exchange (ASX) (AONIA) (RBA) May 2016
Australia
Thomson Enhanced
Reuters – CORRA
Bank of Repo
CDOR Refinitiv No CORRA Yes Yes Secured began
Canada Transactions
Benchmark publication
Canada Services June 2020
Overnight
Hong Kong Interbank
Hong Kong Enhanced
Treasury Deals
Treasury Markets HONIA
HIBOR No HONIA Markets Yes Yes Unsecured Routed
Association yet to be
Association Through
(TMA) published
Hong Kong (TMA) Money
Brokers
Unsecured
SIBOR overnight
Monetary Published
The Association interbank
Authority of daily by
of Banks in SORA Yes Yes Unsecured SGD
Singapore MAS since
Singapore (ABS) transactions
(MAS) July 2005
Singapore SOR brokered in
Singapore
5At a Glance: Official Sector Working Group
Activities and Near-Term Expectations
This tracker follows the official sector working group activities, near-term expected actions, industry actions
around cash fallback language, term rate statuses, and issuance of alternate RFRs to date.
Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to
Group Structure RFR Status Language Status Status Actions Date
The Cross-Industry December 2016: Future work plan for term Future work plan for term In November 2020, the
Committee on Yen Interest Recommended reference rate based on Swaps reference rate based on Swaps Cross-Industry Committee
Rate Benchmarks is divided Tokyo Overnight and Futures is discussed in the and Futures is discussed in the on JPY Interest Rate
into three subgroups and Average Rate (TONA) subgroup for the development subgroup for the development Benchmarks published a
one working group calculated by the of term reference rates. In of term reference rates. In detailed timeline of actions
Bank of Japan focusing on: Bank of Japan. February 2020, Quick Corp February 2020, Quick Corp and objectives for 2021.
Study Group was selected to prepare for was selected to prepare for
on Risk-Free 1. Loans
calculating and publishing calculating and publishing
Reference Rates 2. Bonds prototype term rates. The prototype term rates. The
Cross-Industry subgroup considers possible subgroup considers possible
3. Development of term
Committee on timing of the implementation is timing of the implementation is
reference rates
Japanese Yen around mid-2021. around mid-2021.
Interest Rate 4. Currency Swaps
Recommended fallbacks for
Benchmarks bond and loan products were
outlined in the results of a
Cross-Industry Committee on
JPY Interest Rate Benchmarks
consultation published in
November 2020.
The Euro Working Group September 2018: In February 2021, the WG In July 2019, the WG In March 2020, the There have been
(WG) currently has four Recommended €STR published the results of announced a call to benchmark WG launched a public 7 issues of euro
sub-groups, focusing on: to replace EONIA. consultations on EURIBOR administrators for expressions of consultation on swaptions floating rate notes
fallback trigger events interest in administering €STR- impacted by the CCP which reference
1. Contract robustness February 2019: and €STR-based EURIBOR based forward-looking term discounting transition from €STR with total
Working Group 2. Cash products and Euro WG confirms fallback rates. Feedback structures. In October 2020, EONIA to €STR. Based on volume of €4.85BN.
on Euro Risk- derivatives EURIBOR will on these consultations the WG published feedback the responses received, the
Free Rates continue for the will support the final relating to forward-looking term WG will evaluate potential
3. Financial accounting and medium term. recommendations on both structure methodology on €STR- recommendations.
risk management
November 2019: topics, to be published by the based EURIBOR fallback rates.
Final recommendations on
4. Communication and EONIA will be euro risk-free rate working
In March 2021, the European EURIBOR fallback trigger
education discontinued Jan group in H1 2021.
Central Bank (ECB) announced events and €STR-based
2022 as it is not BMR that it will start publishing EURIBOR fallback rates are
compliant. compounded euro short-term expected to be published
rate (€STR) average rates on by the euro risk-free rate
15 April 2021. The ECB intends working group in H1 2021.
to publish compounded €STR
average rates for 1 week, 1 month,
3 months, 6 months and 12
months tenors, via the Market
Information Dissemination (MID)
platform and through the ECB’s
Statistical Data Warehouse
(SDW). The announcement also
confirmed the publication of a
compounded index based €STR
for the derivation of compounded
rates for any nonstandard tenor.
6At a Glance: Official Sector Working Group Activities and Near-Term Expectations (continued)
Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to
Group Structure RFR Status Language Status Status Actions Date
The WG is broken April 2017: In September 2020, the WG In January 2021 Term SONIA In February 2021, the WG There have been 173
down into sub-groups Recommended published a recommendation became available from ICE published the latest version issues of sterling
focusing on: reformed Sterling of credit adjusted spread Benchmark Administration and of its detailed roadmap for floating rate notes
Overnight Index methodology for fallbacks Refinitiv. transition by end-2021. which reference
1. Bonds
Bank of England Average (SONIA). in cash market products SONIA with total
The BoE, FCA and WG End-Q1 2021 marks a
Working Group 2. Loans referencing GBP LIBOR. volume of £75.1BN,
encourage widespread adoption milestone for market
on Sterling Risk- this is in addition
3. Communications ISDA has confirmed the LIBOR of SONIA compounded in participants to cease
Free Rates to 49 securitisation
& Outreach cessation announcement, by arrears in derivative markets initiation of new GBP
deals referencing
the BoE and FCA, will trigger and considered selected use LIBOR-linked loans, bonds,
4. Pension Funds & SONIA with total
the fixing of the ‘spread cases for Term SONIA reference securitisations and linear
Insurance Companies volume £28.3BN.
adjustments’ to be used in its rates in cash markets, as derivatives (except for the
5. Infrastructure IBOR fallbacks. recommended by FICC Markets risk management of existing There are now
Standards Board. positions that expire after numerous
6. Term Rates (Task Force)
end-2021). Additionally, all originations of
7. Accounting/Tax (Task market participants are to SONIA-referenced
Force) identify all legacy LIBOR loans in the sterling
contracts expiring end- market, across both
8. R
egulatory
2021, that can be actively syndicated and
Dependencies (Task
converted, and accelerate bilateral market
Force)
conversion where viable to sectors, after the
reduce legacy volume. market opened in
July 2019.
The WG is broken June 2017: In June 2020, ARRC published ARRC is expected to work In March 2021, ARRC There have been
down into sub-groups Recommended its final recommendations towards the development of a published a transition 1,667 issuances for
focusing on: Secured Overnight on spread adjustment term reference rate. progress report which a combined total
Financing Rate methodologies for fallbacks included objectives and amount of USD
1. Accounting/Tax The FRB published various sets
Alternative (SOFR) as the RFR in cash products. These priorities for 2021. 1,196.4 BN.
of data on indicative forward-
Reference Rates 2. Business Loans to replace U.S. dollar recommendations were
looking SOFR term rate data
Committee LIBOR. developed after reviewing
3. Consumer Products (last update April 2019)
(ARRC) responses to a supplemental
April 2018: New York
4. Floating Rate Notes consultation on spread
Federal Reserve
adjustments.
5. Legal Bank (NYFRB) began
publication of SOFR.
6. Market Structure and
Paced Transition
7. Operations/Infrastructure
8. Outreach/
Communications
9. Regulatory Issues
10. Securitizations
11. Term Rate
7At a Glance: Official Sector Working Group Activities and Near-Term Expectations (continued)
Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to
Group Structure RFR Status Language Status Status Actions Date
The WG is broken October 2017: May 2020: WG has recommended using FINMA published a The first SARON-
down into sub-groups Recommended Swiss The NWG discussed LIBOR compounded SARON wherever transition roadmap for linked public
focusing on: Overnight Average end-scenarios and fallback possible 2021 to prepare for LIBOR’s issuance was
Rate (SARON). language. The NWG end. This roadmap was in August 2019.
1. D
erivatives & Capital
recommended “to use the adapted to account for Issuance was for
National Markets
lookback method for CHF recommendations provided CHF 525 mm in
Working Group 2. L
oan and Deposit syndicated loans with an offset in the FSB’s 2021 roadmap. perpetual tier 1
on Swiss Franc Markets of 5 business days.” notes.
Reference Rates The NWG has
recommended market In the loan market,
participants switch the first SARON-
bilateral CHF LIBOR-based linked bilateral loan
derivatives to SARON- was originated in
based derivatives ahead of November 2019,
end-2021. and in April / May
2020, multiple Swiss
retail banks began
offering SARON-
linked residential
mortgage loans.
RBA recognizes three BBSW has been BBSW has been strengthened RBA and relevant regulators There have been
working groups related strengthened and and will continue to be will continue to monitor 5 issuances for a
to interest rate will continue to be published. both BBSW and AONIA. combined total
benchmark reform. published going amount of AUD
RBA evaluated that there
Reserve Bank forward. 1.94 BN.
1. A
SX BBSW Advisory are enough transactions to
of Australia Committee focuses on AONIA is being determine BBSW and that it will
Interest Rate BBSW Benchmark published as an RFR continue to exist as part of a
Benchmark as part of a “multiple multi-rates approach.
Reform Page 2. A
ustralian Financial
rates” approach.
Markets Association
(AFMA) focuses on
promoting industry
dialogue and information
sharing
3. Australian Securitisation
Forum (ASF) established
a working group to
consider benchmark
reform on the Australian
Securitisation Market
8At a Glance: Official Sector Working Group Activities and Near-Term Expectations (continued)
Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to
Group Structure RFR Status Language Status Status Actions Date
The Canadian Alternative CARR endorses an CARR developed Principles CDOR will continue to CARR will continue to There have been
Reference Rate Working enhanced CORRA for Enhancements to Fallback exist as a part of a multiple rates support the adoption of, and 5 issuances for a
Group (CARR) is based on the Language. Additionally, approach. transition to CORRA. combined total
sponsored by the Canadian recommendations in November 2020, CARR amount of CAD
In November 2020, CARR also In October 2020, CARR’s
Fixed-Income Forum outlined in their published a consultation on 1.34 BN.
published a consultation on mandate was expanded to
Canadian (CFIF) which is a group set consultation paper CDOR fallback language for
a proposed methodology for include an analysis of CDOR.
Alternative up by the Bank of Canada. with no changes floating rate notes.
calculating CORRA-in-arrears.
Reference Rate Both groups are comprised based on responses. CARR is also expected to
Working Group of market participants publish the results of its
CFIF endorses
and Bank of Canada consultation on calculating
monitoring and
representatives. CORRA-in-arrears and draft
reviewing issues for
fallback language for CDOR
transition by the
FRNs.”
transition subgroup
and by the benchmark
admin.
As HONIA’s administrator, The WGARR has HIBOR will continue to exist as a Technical adjustments may
the TMA established an proposed technical part of a multiple rates approach. be made to HONIA based
internal Working Group on refinements to HONIA upon the results of the 2019
TMA may also try to develop an
Alternative Reference Rates outlined in an April consultation.
OIS curve for HONIA depending
(WGARR). 2019 consultation
on market conditions and There are no plans to
Hong Kong paper.
demand. discontinue HIBOR and a
Treasury Markets Refinements relate to multi rate approach will be
Association the rate’s data source, adopted using both HONIA
Working Group reporting window and and HIBOR.
on Alternative publication time.
Reference Rates In July 2020, HKMA
“WGARR” In December published a circular providing
2019, TMA and an update on the status of
WGARR published the transition and outlining
the conclusion upcoming milestones.
of the April 2019
consultation paper.
SC-STS was established ABS-SFEMC identified In August 2020, ABS published Enhanced SIBOR will be SC-STS published its There have been
by the Monetary Authority SORA as the a calculation methodology for discontinued and transitioned detailed roadmap of 11 issuances for a
of Singapore (MAS) with alternative reference fallback rate (SOR)” to SORA. expected actions and combined total
the Association of Banks in rate for SOR. objectives for 2021 amount of SGD
The updated January 2021
Singapore (ABS) providing and 2022. 8.72BN.
In July 2020, ABS- version of the SC-STS SOR
Steering administrative support.
SFEMC and SC-STC Transition to SORA FAQs
Committee for SC-STS has four subgroups
announced a decision for Corporates noted that
SOR Transition focusing on:
to discontinue the a forward-looking term
to SORA (SC- 1. Derivatives new enhanced SIBOR SORA cannot be explored or
STS) and also transition developed until there is deeper
2. B
onds / Perpetual
this market to and more liquid trading of
Securities
SORA. A summary SORA derivatives. This may be
3. B
usiness / Syndicated of feedback on further explored as the market
Loans the plan for this develops.
discontinuation
4. Consumer Products
was published in
December 2020.
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