Reference rate reform: from Interbank Offered Rates to risk-free rates

Interbank Offered Rates (IBORs) are often used as reference rates in the pricing of financial contracts and products. These reference rates are currently undergoing a reform and may be replaced by new risk-free rates (RFRs). The reform is implemented in phases. We are here to support your company during the transition.

Reference rate reform

Interbank Offered Rates (IBORs) are reference rates based on the interest rates at which banks lend money to one another in the interbank market. Reference rates are used as benchmarks in the pricing of many financial contracts and instruments.

Examples of Interbank Offered Rates: 

• EONIA (EUR)

• EURIBOR (EUR) 

• LIBOR (GBP, USD, CHF, EUR, JPY)

• STIBOR (SEK) 

• CIBOR (DKK) 

• NIBOR (NOK)

Why are the reference rates being reformed?

The interbank markets are less liquid and the Interbank Offered Rates are based on fewer transactions compared to other markets. It is therefore necessary to introduce more stable and transparent reference rates, which are based on actual transactions. 

The EU regulation on indices used as benchmarks in financial instruments and financial contracts (the Benchmarks Regulation) has been applicable since 1 January 2018. During the transition period, the current Interbank Offered Rates are being adjusted with the aim of conforming them to the requirements of the Benchmarks Regulation. Where this is not deemed possible, new risk-free rates will be introduced.

How will the reference rate reform impact my business?

If your company has products in which the benchmark IBOR will be replaced by a new reference rate, we will tell you about the procedure regarding the product in question.