Tunnel as seen from a train
Tunnel as seen from a train


IBOR transition

Some of the most important numbers used in global financial markets are changing.

For Macquarie, it’s important that our clients, counterparties, investors and other stakeholders understand what financial benchmark rate reform is and what it means for them, Macquarie and financial markets more broadly.

Financial benchmark rate reform impacts short-term interest rates commonly used across financial markets, also known as interbank offered rates (IBOR).

What are IBOR?

IBOR, including BBSW1, EURIBOR2, LIBOR3 and TIBOR4, are interest rate benchmarks that have been used in a wide variety of financial instruments for decades. LIBOR is the most widely used interest rate benchmark in financial markets, estimated to be referenced in over $US200 trillion of financial products, including bonds, derivatives and loans.

IBOR are designed to reflect the price of interbank funding markets. Each IBOR is published daily across a variety of currencies and tenors (e.g. overnight, one-week, three-month, six-month), based on submissions by a panel of banks.

Why are IBOR reforms taking place?

Over time, changes in interbank funding markets have meant that IBOR panel bank submissions were based less on observable transactions, and more on expert judgment.

Financial markets regulatory authorities reviewed what these changes meant for financial stability, and in 2013 published recommendations to reform major interest rate benchmarks. These recommendations included best practice principles for financial benchmarks, measures to strengthen existing benchmarks and plans to develop alternative reference rates.

As a result of these recommendations, many IBOR around the world are undergoing reforms and some, including LIBOR, are being replaced with alternative reference rates. This page is primarily concerned with the replacement of LIBOR.

What does the replacement of LIBOR entail?

The replacement of LIBOR is a significant undertaking for financial markets participants. LIBOR is being phased out and replaced by alternative reference rates (ARR).5

The UK’s Financial Conduct Authority, the regulator of LIBOR, has indicated its expectation that publication of LIBOR is likely to cease at the end of 2021 and that all institutions should end their reliance on LIBOR by that time.

ARR have been identified for each of the five LIBOR currencies:

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CHF LIBOR SARON - Swiss Average Rate Overnight
EUR LIBOR €STR - Euro Short-Term Rate
GBP LIBOR SONIA - Reformed Sterling Overnight Index Average
USD LIBOR SOFR - Secured Overnight Financing Rate
YEN LIBOR TONAR - Tokyo Overnight Average Rate

As we prepare for this change, regulators and financial markets participants around the world are taking action to ensure the adoption of ARR takes place with minimal disruption and risk to clients, counterparties, investors and other stakeholders.

Why is the LIBOR replacement important for clients, counterparties, investors and other stakeholders?

While LIBOR publication may cease at the end of 2021, it is important for clients, counterparties, investors and other stakeholders to develop an understanding of what the transition from LIBOR to ARR means now.

As the industry considers how and when it will transfer to ARR, it is important to note that the timing of changes may vary based on the currencies, products and participants involved. As a result, early action, to prepare and understand LIBOR exposure, is recommended by regulators for financial markets participants.

What can you do to prepare?

Macquarie is preparing for the LIBOR transition and we encourage our clients, counterparties, investors and other stakeholders to do so as well.

As a client or counterparty of Macquarie, it is important that you are aware of what the change from LIBOR to ARR might mean for you, including whether you require guidance or support from professional advisers.

Preparation may include, understanding:

  • your exposures to LIBOR and how existing transactions may behave if reliance on LIBOR is phased out or LIBOR publication ceases, including the risks involved in continuing to use LIBOR in new transactions
  • actions required to ensure your readiness and limit any impacts and risks of the LIBOR transition
  • the differences between LIBOR references today and the proposed ARR replacement
  • other impacts that the transition from LIBOR to ARR may have on your business

The financial services sector continues to work through certain aspects of the LIBOR transition and the functioning of new markets and products. National working groups, and key regulators, in each of the LIBOR currencies are leading efforts to resolve or provide clarity on the outstanding issues. Our stakeholders can follow industry developments between now and the end of 2021 by staying connected with Macquarie, and directly through the website links provided below.

Beyond LIBOR, you might also seek to understand the potential impacts and risks relating to other IBOR that may be subject to reform, including BBSW, EURIBOR and TIBOR rates.

What does the change mean for Macquarie?

As a diversified financial group, with a variety of global products and services, the transition from LIBOR to ARR is an important change for us.

To ensure we are well prepared, we are conducting a detailed analysis of our use of LIBOR rates. This includes a review of LIBOR references within legal agreements, systems, models and processes. We are developing plans to manage the related impacts and risks of transition, including how we meet the needs of our clients as ARR usage increases and where direct engagement on existing transactions, agreements and arrangements might be required.

Further information

For more information, please get in touch with your usual Macquarie contact or see our IBOR transition FAQ.

As further details of the transition arrangements emerge, we will update stakeholder-facing staff with guidance.

For enquiries at the Macquarie Group or Macquarie Bank level, or for regulatory or sectoral input, please contact our Global IBOR Transition Team: IBOR@macquarie.com

For information on market developments please see the following external sources:

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The Alternative Reference Rates Committee



The Working Group on Sterling Risk-Free Reference Rates



The National Working Group on Swiss Franc Reference Rates



Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks



The working group on euro risk-free rates



Reserve Bank of Australia - Interest Rate Benchmark Reform in Australia


Financial Stability Board

Financial benchmarks


Macquarie Group is not responsible for the accuracy of information provided in the external sources listed above.

This page was last updated on 30 April 2020.

  1. BBSW – Bank Bill Swap Rate 
  2. EURIBOR – Euro Interbank Offered Rate 
  3. LIBOR – London Interbank Offered Rate 
  4. TIBOR – Tokyo Interbank Offered Rate
  5. External sources may refer to ARR as Risk-Free Rates (RFR) or Alternative Risk-Free Rates (ARFR)