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13 June 2024
The ISDA IBOR Fallbacks Supplement and IBOR Fallbacks Protocol
What is the problem with IBORs?
nInter-bank offered rates (IBORs) including the London inter-bank offered rate (LIBOR) are interest rate benchmarks which have traditionally been used as the main reference rates for derivatives debt securities bank loans securitisations and deposits. As the name suggests IBORs theoretically reflect the interest rates at which banks are prepared to lend to each other. The inter-bank market has however declined to a point where the level of activity is insufficient to provide benchmarks which are robust based in transaction data and immune from manipulation and the financial markets are transitioning from IBORs to risk-free rates (RFRs) such as SONIA (sterling) SOFR (US dollar) €STR (Euro) TONA (Yen) and SARON (Swiss francs).
Publication of LIBOR is not guaranteed after end-2021 which...
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