This page is a resource for developments regarding benchmarks relating to IBOR transition.
Major interest rate reference rates (such as LIBOR, EURIBOR, and TIBOR or generically known as IBORs) are widely used in the global financial system as benchmarks for a large volume and broad range of financial products and contracts.
In response to weaknesses identified in the setting of benchmarks such as the London Interbank Offered Rates (LIBOR), the global regulatory community has been involved in a program to strengthen benchmarks.
For the Australian dollar, the key interest rate benchmarks are the bank bill swap rates (BBSW) and the cash rate. Reforms have also been undertaken to enhance the robustness of these benchmarks.
The United States and Europe are now working towards the phase-out of the LIBOR rate. Given the predominance of LIBOR reference rates across financial instrument documentation, any phase-out has major implications for the markets globally. Accordingly, the Australian market is preparing for the effects of this development.
This is the most significant financial market development currently underway affecting markets. There are many concurrent streams of work, and with an abundance of information being constantly released, it is particularly important to be aware of alternative benchmarks that are available or that are being developed.
AFMA facilitates industry dialogue and thinking about these broader implications. For Australia, AFMA supports the IOSCO January 2018 Statement on Matters to Consider in the Use of Financial Benchmarks that users need to have robust fallback provisions in relevant contracts and instruments that reference a benchmark. If a permanent discontinuation of an IBOR or other benchmark occurs, the fallback provisions would need to be robust enough to prevent potentially serious disruption to markets and market participants (including users and their clients), and to safeguard the continuity of contracts, as a result.
The links below (and in the sidebar to the left) provide further detail on developments across markets internationally and domestically.