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London Interbank Offer Rate (LIBOR)

Navigating the LIBOR transition

What is happening?

LIBOR and other interest rate benchmarks have attracted headlines in recent years amid evidence of manipulation and falling liquidity in underlying markets.

LIBOR is widely expected to cease once official support for contributions to the benchmark stop at the end of 2021.

Regulators and central banks have announced that Risk Free Rates (RFRs), based on actual overnight money market transactions, are to replace LIBOR and some other similar IBORs around the world. Existing RFRs include the Sterling Over Night Index Average (SONIA) in the UK, Secured Overnight Financing Rate (SOFR) in the U.S. and Euro Short-Term Rate (€STR) in the euro area. 

While much of the market is expected to adopt these overnight RFRs, pockets of demand for term rate benchmarks based on RFRs for loans and other cash products remain.  

Firms can prepare for the LIBOR transition by taking the following actions, amongst others:

  • Assess how exposed the organization is to LIBOR
  • Identify which processes and inputs need to be replaced with an alternative reference rate
  • Assess what alternative data or reference rates exist to replace LIBOR
  • Prepare to replace LIBOR with the identified alternatives.

How can Refinitiv help?

Refinitiv is committed to providing the data clients need to adjust operating models across front, middle and back offices and to create new financial products in light of the IBOR reforms and LIBOR transition.

Several Refinitiv products and services are being enhanced to allow customers to manage this transition to alternative reference and benchmarking tools. In addition Refinitiv are launching new benchmarks starting with Term the SONIA Reference Rate (TSRR), the alternative to GBP LIBOR. There are also many solutions that already exist to manage the transition, and Refinitiv is currently working on a number of initiatives to ensure our clients can continue to work seamlessly as IBOR reform and the LIBOR transition develop.

How can Eikon help?

The IBOR Transition app keeps you up to date with global changes to interest rate benchmarks. The app provides news and values on a variety of rates:

  • Risk-free reference rates (RFRs)
  • Reformed IBOR benchmarks
  • Incumbent interest rates
  • Brokers RFR derivative content (Fixing, OIS, Basis Swaps, FRAs, etc).

Transition to Term SONIA

The Refinitiv Term SONIA prototype is a forward-looking, risk-free reference rate available in 1-month, 3-month, 6-month and 12-month tenors denominated in sterling and designed to be an alternative to LIBOR.

The Working Group on Sterling Risk-Free Reference Rates recommends that all new issuance of sterling LIBOR-referencing loan products, which expire after the end of 2021, should cease by the end of Q1 2021; and after the year-end 2021 the Financial Conduct Authority, which regulates the LIBOR benchmark administrator, will no longer compel banks to submit to LIBOR, creating a strong possibility of an imminent cessation.

That means market participants must rapidly seek alternative rates and in many cases a Term SONIA Reference Rate will be suitable.

At Refinitiv, we have leveraged our many years’ experience administering regulated benchmarks to create the Term SONIA Reference Rate prototype.

LIBOR transition and IBOR reform

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05:57

 Part 1: What do companies need to know about the LIBOR transition and what are the challenges they face?

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Part 2: What data and information do firms require to navigate the LIBOR transition?

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04:24

Part 3: How can clients use Eikon to solve for the challenge of transitioning from LIBOR?

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Part 4: What are some of the ways customers can access the content and information they need to navigate the LIBOR transition?

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Part 5: How will Refinitiv’s solutions help customers in navigating the LIBOR transition?

The highways crossing in a city

Report

Moving forward with LIBOR transition and IBOR reform

Figuring out what is at stake with LIBOR and other interbank offered rates (IBORs)

Our upcoming solutions

Scenario analysis tools

to help assess the impact of IRS, FRNs LIBOR based on existing portfolios.

New Refinitiv Eikon calculator

to help calculate compounded rates for SONIA, SOFR, €STR and TONAR as recommended by Bank of England.

New real-time analytics-derived calculations

such as Forward Swaps, Swaptions skews on the new RFRs available in Datascope and Eikon.

New Refinitiv Term Reference Rates

To help those market participants who require a LIBOR alternative with a term structure.

Fallback language in bond notes

Standardized model for fallback events

Bond covenant and transition changes