Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266232 
Year of Publication: 
2021
Series/Report no.: 
wifin Working Paper No. 12/2021
Publisher: 
RheinMain University of Applied Sciences, Wiesbaden Institute of Finance and Insurance (wifin), Wiesbaden
Abstract: 
The reform of LIBOR by its administrator IBA to a transaction-based benchmark, completed 2019, has not succeeded due to lack of transactions. In July 2017 the UK FCA Chief Bailey prepared the market for the end of LIBOR by end-2021. National working groups have developed alternatives to LIBOR based on overnight Risk-Free Rates. For derivatives linked to LIBOR and other IBORs, ISDA developed an IBOR Fallbacks approach on the basis of term and spread adjusted Risk-Free Rates. Bloomberg started daily calculations of fallback rates for covered IBORs on 21 October 2020. An ISDA supplement and a protocol for new and legacy derivative contracts became effective on 25 January 2021. A future cessation and loss of representativeness for all LIBOR settings was declared by IBA and the FCA on 5 March 2021 triggering an index cessation event under ISDA. Some USD LIBOR settings will cease mid-2023 instead of end-2021. The FCA will use enhanced powers to produce Synthetic LIBOR for some settings in GBP and JPY LIBOR beyond end-2021. The standard-setting bodies IOSCO and FSB are closely following the impact of LIBOR cessation and transition on systemic risk at the global level.
Subjects: 
2006 ISDA Definitions
2021 ISDA Interest Rate Derivatives Definitions
Interest Rate Benchmark Reform
EURIBOR
€STR
fallback rates
IBOR
IBOR Fallbacks Protocol
IBOR Fallbacks Supplement
IOSCO Principles for Financial Benchmarks
LIBOR
LIBOR Cessation
LIBOR Transition
Risk-Free Rates (RFRs)
Reference rates
SARON
SOFR
SONIA
Term SONIA Reference Rates (TSRR)
TONA
JEL: 
E43
G01
G15
G18
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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