IBOR Transition

LIBOR, the London Interbank Offered Rate, is the most commonly used set of IBORs based on the rates at which prime banks estimate they can borrow from each other. It is calculated and published daily for five currencies and a range of maturities, and is used worldwide in the calculation of interest and other payments for many loans, derivatives, bonds, and other financial transactions. However, LIBOR and other reference rates are being reformed or replaced due to concerns about their reliability.

ARRs are benchmarks generally based on actual overnight transactions. They are considered to be more robust as they are based upon a larger volume of observable transactions. Some examples of ARRs include the Secured Overnight Financing Rate (SOFR), Sterling Overnight Index Average (SONIA), Euro Short Term Rate (€STR) or EURIBOR, Swiss Average Overnight Rate (SARON), and Tokyo Overnight Average Rate (TONAR). The recommended replacement rate for USD LIBOR is SOFR, while for Sterling LIBOR, it is SONIA.

RAKBANK has established a group-wide initiative to identify, assess and monitor risks associated with the discontinuation or unavailability of benchmarks, including LIBOR, and the transition to Alternative Reference Rates. We are evaluating existing contracts across all products to determine the impact of the discontinuation of LIBOR and other benchmarks and to address potential changes to those contracts. Furthermore, we have adhered to the ISDA 2020 IBOR Fallbacks Protocol to ensure frictionless derivative offerings with our clients. We will work closely with our customers on the transition and provide updates as necessary.

We will work closely with our customers on the transition, taking into consideration their concerns, and will provide updates as necessary. If your facility (or final rate fixing) is before the specified dates for the cessation of LIBORs, it can mature naturally, with no required action. 

• For all GBP, EUR, CHF, JPY settings, and the 1-week and 2-month USD settings, the cessation of LIBOR fell on 31 December 2021.
• For the remaining USD settings, the cessation of LIBOR fell on 30 June 2023.

Otherwise, we will liaise with you over the course of 2023 to transition the contract to an agreed Alternative Reference Rate at a fixing date prior to the specified dates. We recommend that you also consult your own legal, tax, financial and other professional advisors for more specific guidance.

You can find further external information from the following sources:

• New York Federal Bank Committee on LIBOR Transition
• Bank of England – Sterling Risk Free Rate Working Group
• ESTR
• Swiss National Bank
• Bank of Japan
• Loan Markets Association
• ISDA