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Tunnel as seen from a train

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IBOR transition

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 (IBORs).

At the end of 2021, LIBOR in most currencies and tenors will discontinue. If you have not already done so, we strongly encourage you to take the necessary steps to prepare for the transition to alternative reference rates (ARRs)1 without delay.

We’re here to help.

 

The table below summarises when each LIBOR benchmark is planned to cease publication:

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Currency Tenor LIBOR cessation date
GBP Overnight, 1- week, 2-month, 12-month 31 Dec 2021
1-month, 3-month, 6-month 31 Dec 2021*
USD 1-week, 2-month 31 Dec 2021
Overnight, 1-month, 3-month, 6-month, 12- month 30 June 2023
JPY Overnight, 1- week, 2-month, 12-month 31 Dec 2021
1-month, 3-month, 6-month 31 Dec 2021*
CHF All tenors 31 Dec 2021
EUR All tenors 31 Dec 2021

*These rates will continue to be published after their cessation date as a so-called “synthetic LIBOR”, for use in a limited range of legacy contracts (refer to the 29 September FCA announcement here, the November Feedback Statement here, and FCS’s FAQs to Synthetic LIBOR here).

 

USD LIBOR cannot be used in new contracts after 31 December 2021 (except in accordance with applicable regulations or bank supervisory guidance)

While some tenors of USD LIBOR will cease to be published after 31 December 2021, the remaining USD LIBOR tenors will cease after 30 June 2023.  Regulators in the United States, and other jurisdictions, including the United Kingdom, Europe, and Australia, have made it clear that firms should stop new use of the remaining tenors of USD LIBOR in new contracts after the end of 2021, except for a small number of exceptions.

Accordingly, Macquarie does not expect to enter into new USD LIBOR contracts with counterparties after 31 December 2021 except for permitted exceptions.

If you would like to discuss how these restrictions might impact your business with Macquarie, please contact your usual Macquarie business contact.

 

What are (L)IBORs?

IBORs, including BBSW2, EURIBOR3, LIBOR4 and TIBOR5, 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.

LIBOR (the ‘London Interbank Offer Rate’) is designed to reflect the price of interbank funding markets and is published daily across five currencies6 and seven tenors based on submissions by a panel of banks.

 

Why are IBOR reforms taking place?

Over time, changes in interbank funding markets have meant that LIBOR 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 (ARRs).

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

 

What can you do to prepare?

Macquarie is preparing for the LIBOR transition and many of our clients, counterparties, investors, and other stakeholders are doing so as well. If your firm has LIBOR exposures, it is important that you are now prioritising measures to prepare for LIBOR cessation.

As a client or counterparty of Macquarie, it is important that you are aware of what the change from LIBOR to an ARR might mean for you, and that you continue to prepare for, and manage any risks to your business arising from LIBOR discontinuation, including:

  • reviewing industry resources and initiatives published by regulators, industry bodies and national working groups (see our ‘FAQ’ and ‘Industry Resources’ links below)
  • understanding your exposures to LIBOR and how existing transactions may behave as LIBOR is phased out or when publication of LIBOR ceases, including the risks involved in using LIBOR in new transactions prior to 31 December 2021.
  • looking at other impacts that the transition from LIBOR to alternative rates may have on your business.
  • assessing whether you require guidance or support from professional advisers.

Our stakeholders can follow industry developments by staying connected with Macquarie, and through the website links provided below.

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

 

What is Macquarie doing to support clients’ (L)IBOR transition needs?

  • Macquarie is ready to transact with clients and counterparties across a growing range of ARR currencies and products.
  • Macquarie will continue to update clients on the progress of LIBOR transition at Macquarie and across markets, both by direct communication and information available on our IBOR webpages.
  • Macquarie can provide various alternatives and solutions to transition, hedge and unwind legacy (L)IBOR exposures; however, this will vary by product and currency so please contact your Macquarie representative to discuss specific details.

 

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 ARRs is an important change for us.

Macquarie is well prepared to respond to market developments and to meet client needs. Macquarie plans to transition away from the use of LIBOR broadly in line with markets, including meeting the supervisory expectations and industry milestones highlighted in this update.  This includes the ceasing of issuing new LIBOR referencing products as outlined in the guidance above.

IBOR Transition FAQs

Information about EONIA cessation

Industry resources

Contact our Global IBOR Transition Team

This page was last updated on 1 December 2021.

  1. ARRs (Alternative Reference Rates) & RFRs (Risk Free Reference Rates) used interchangeably
  2. BBSW – Bank Bill Swap Rate
  3. EURIBOR – Euro Interbank Offered Rate
  4. LIBOR – London Interbank Offered Rate
  5. TIBOR – Tokyo Interbank Offered Rate
  6. Swiss Franc (CHF), Euro (EUR), Pound Sterling (GBP), Japanese Yen (YEN) and US Dollar (USD).

Macquarie Group is not able to provide advice and you should seek independent legal, financial and/or tax advice to ascertain what the LIBOR Transition means for you and the LIBOR referencing products and services you may have exposure to. 

 

Clients should consider any loan amendments and the appropriateness of the fallbacks incorporated therein together with their legal, tax, financial and accounting advisers, taking into consideration their own circumstances and the fallbacks that may be applicable in any related products.