Interbank Offered Rate (IBOR) reform — Overview

Benson Wong
2 min readOct 5, 2020


Interest rate benchmarks include:

  • London Interbank Offered Rate (LIBOR)
  • Euro Interbank Offered Rate (EURIBOR)
  • Euro Overnight Index Average (EONIA)
  • certain other Interbank Offered Rates (IBORs)

The UK Financial Conduct Authority (FCA) will no longer compel banks to submit rates used for the calculation of LIBOR, after 2021.

This indicates that LIBOR is to be discontinued, most likely after the end of 2021.

Regulators globally emphasized that market participants now should start transitioning from the use of IBORs to alternative benchmark rates.

Regulatory authorities, public & private sector working groups in several jurisdictions, include:

  • International Swaps and Derivatives Association (ISDA)
  • Sterling Risk-Free Rates Working Group
  • Working Group on Euro Risk-Free Rates
  • Alternative Reference Rates Committee (ARRC)

They have been discussing alternative benchmark rates to replace the IBORs.

These working groups are considering how to support a transition to alternative rates and the development of new products referencing them.

These reforms are expected to cause at least some interest rate benchmarks to perform differently to the way that they do currently or to disappear, which may impact the products and services of the banks that people currently use and those the banks may provide in the future.

A wide range of financial products are using benchmark rates to determine interest rates and payment obligations, such as:

  • derivatives
  • bonds
  • loans
  • structured products
  • mortgages
  • etc.

Benchmark rates are used to value financial products and also be a performance tracker for funds, among other purposes.

LIBOR is the most widely used benchmark. It is used in financial products denominated in a number of currencies and is published in

  • GBP (British Pound)
  • USD (US Dollar)
  • EUR (Euro)
  • JPY (Japanese Yen)
  • CHF (Swiss Franc)

Some other currencies also use specific benchmarks such as

  • EURIBOR and EONIA — for EUR
  • Tokyo Interbank Offered Rate (TIBOR) — for JPY
  • Hong Kong Interbank Offered Rate (HIBOR) — for HKD
  • Singapore Interbank Offered Rate (SIBOR) — for SGD

Financial regulatory authorities stressed their concern that the interbank lending market, which is using IBORs, is no longer sufficiently active or liquid.

The Financial Stability Board (FSB) in 2014 recommended the market to reform major interest rate benchmarks and use near risk-free rates (RFRs) that are based on more active and liquid overnight lending markets, instead of IBORs.