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.