IBOR Transition

New reference interest rates on Capital Markets: Our experts support you comprehensively

LIBOR

The UK financial regulator seals the end of LIBOR rates

The UK Financial Conduct Authority (FCA) already announced in 2017 that it will no longer guarantee the LIBOR panel after 2021.

In recent years, the FCA regularly stressed that LIBOR is hardly likely to survive after 2021. In its letter from January 2020, it set out clear milestones for reducing exposure to LIBOR and shifting it towards SONIA.

On 23 June 2020, the UK Chancellor of the Exchequer announced his intention to extend the powers of the FCA to allow a managed and orderly end to LIBOR if

  • the LIBOR panel becomes too small,
  • the FCA makes a statement of non-representativeness of LIBOR, for example, because the LIBOR panel no longer reflects the underlying market,
  • the underlying market has become too small and insignificant (in daily traded market volume) for the requirements of benchmark interest rates.

On 5 March 2021, the UK Financial Conduct Authority (FCA) announced that the LIBOR rates for the currencies CHF, EUR, GBP and JPY are no longer representative of their underlying markets as of 31 December 2021 and, hence, shall not longer be used beyond that date.

In case of USD LIBOR, usage of LIBOR rates is permissible for legacy assets only until 30 June 2023, however only for major tenors. 1 week and 2 months tenors will cease to be published also for USD from 2022 onwards.

However, the market transition in all currencies (including USD), especially also for new business, should be completed earlier, according to statements by the supervisory authorities and working groups.

In most cases, therefore, DZ BANK believes it is essential to actively convert and renegotiate contracts ("repapering"), as this is the only way to ensure that transactions are converted in a targeted manner that is appropriate for the customer and can be easily managed operationally.

Affected products are:

The markets are currently in motion. In many cases a uniform market standard has not yet been established.

If you have any questions regarding the EONIA conversion, please contact your usual contacts at DZ BANK or a contact person named on the IBOR Transition page.