The London Interbank Offered Rate (LIBOR) is published for seven interest periods, ranging from overnight to 12 months, and for five currencies (USD, GBP, EUR, JPY and CHF); it is therefore currently used in different jurisdictions worldwide. It is based on quotes received from the LIBOR panel banks, which provide their cost of borrowing funds on the wholesale money market.
The long and complex process of transitioning away from LIBOR has finally entered its final stages. After the conclusion of a market consultation launched in December 2020 by IBA ( ICE Benchmark Administration, the Libor administrator) on the future Libor discontinuation, on March 5, 2021 the FCA (Financial Conduct Authority, the UK financial regulatory body), announced that GBP, EUR, CHF, JPY Libor and 1 week and 2 months USD Libor will either cease to be provided or no longer be representative immediately after December 31, 2021. O/N, 1M, 3M, 6M and 12M USD Libor settings will continue to be published until June 30, 2023, after that they will either cease to be provided or no longer be representative. Beyond these dates, the so-called “fallback” arrangements will be triggered in existing contracts. Fallback arrangements are legal clauses included in financial contracts which indicate the replacement rate or the calculation methodology to be applied to determine the replacement rate in case of temporary non-availability, discontinuation or declaration of non-representativeness of the contractual rate by a competent authority.
Regulators, private sector representatives and other relevant stakeholders gathered in dedicated Working Groups worldwide to promote and guide the efforts required to replace the IBORs and to identify robust alternatives to the soon-to-be-discontinued indices. The so-called Risk Free Rates (RFRs) have been identified as replacements for the IBORs. Such rates rely exclusively on effective market transactions. The table below displays the relevant rates and the main actors involved in their determination across the main jurisdictions where our Group is active.