IBOR Global Benchmark Transition Report
SIFMA, SIFMA AMG, ISDA, AFME and ICMA published a new report that assesses the issues involved with benchmark reform, and makes recommendations on steps firms can take to prepare for the transition from interbank offered rates (IBORs) to alternative risk-free rates (RFRs).
See related press release:
Excerpt
Introduction
The Future of IBORs Interbank offered rates (IBORs) play a central role in financial markets, and act as reference rates to hundreds of trillions of dollars in notional amount of derivatives and trillions of dollars in bonds, loans, securitizations and deposits.1 The dependence on IBORs by all sectors of the financial markets is changing, however.
There are now real concerns about the sustainability of certain IBORs due to a significant decline in activity in the unsecured bank funding market that they are supposed to represent. Given the limited number of actual transactions, and with banks reluctant to provide submissions based on judgement2 , the viability of certain IBORs is now in doubt.
Significant work has been conducted by global regulators and the public-/private-sector risk-free rate working groups (RFR working groups) to identify alternative, nearly risk-free rates (RFRs) and plan for a transition to those rates as appropriate.3
This global effort reflects recognition that any transition to alternative RFRs is a larger undertaking than any single private or public institution is capable of delivering, and requires coordinated efforts in order to succeed.
This does not mean that individual institutions can afford to hold off taking action. In a speech on July 27, 2017, Andrew Bailey, Chief Executive Officer of the UK’s Financial Conduct Authority (FCA), stressed that each individual firm should take responsibility upon themselves.