The London Inter-Bank Offered Rate (LIBOR) has been the most widely used interest rate benchmark in today’s financial system since the 1970s. The LIBOR coverage ranges from complex derivatives to residential mortgages, underlying over $370 trillion of transactions across the globe. Since 2008, significantly reduced volumes of interbank unsecured term borrowing are calling into question LIBOR’s ability to continue playing the central role of being the reference interest rate. In 2017, the regulatory body in the United Kingdom and LIBOR regulator – Financial Conduct Authority (FCA) – declared that banks will no longer be required to make LIBOR submissions after December 31 2021.
On November 30 2020, ICE Benchmark Administration Limited (IBA) announced that it will hold a consultation on its intention to (1) cease the publication of the one-week and two-month USD LIBOR after December 31, 2021, but (2) continue publishing the remaining USD LIBOR until June 30, 2023. Earlier in that month, on November 18 2020, IBA also announced that it will, in the near future, consult on its intention to cease the publication after December 31, 2021 of GBP, EUR, CHF and JPY LIBOR. This possible postponement for USD LIBOR cessations has been endorsed by Alternative Reference Rates Committee (ARRC) and the FCA. US banking regulators issued a joint statement that is supportive of the postponement but encouraged banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practical and in any events by December 31, 2021.
International Swaps and Derivatives Association (ISDA) and Alternative Reference Rates Committee (ARRC) have formed working groups to actively explore alternative risk-free rates (“RFRs”, e.g. Secured Overnight Financing Rate is the RFR for USD LIBOR) and the calculation mechanisms for derivatives and cash instruments (loans, floating rate notes, etc.) respectively.
The New Development Bank (NDB) has established the LIBOR Transition Steering Committee and LIBOR Transition Working Group to conduct comprehensive impact analysis of LIBOR Transition in different working streams, such as lending, funding, legal, information technology, client outreaching and accounting etc. NDB is closely monitoring market development and proactively engaging with our borrowers for a smooth and successful transition from LIBOR. The Bank is also collaborating with other Multilateral Development Banks and major financial market players to track industry developments and will adopt best practices.
If you have any questions, please contact NDB at LIBOR-Transition@ndb.int .
- ICE Benchmark Administration to Consult On Its Intention to Cease the Publication of GBP, EUR, CHF and JPY LIBOR
- ICE Benchmark Administration to Consult on Its Intention to Cease the Publication of One Week and Two Month USD LIBOR Settings at End-December 2021, and the Remaining USD LIBOR Settings at End-June 2023
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