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 IBORs?

IBORs, 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.

LIBOR is designed to reflect the price of interbank funding markets and 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 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.

As a result of these recommendations, many IBORs 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 (ARRs).5

The UK’s Financial Conduct Authority, the regulator of LIBOR, confirmed the cessation or loss of representativeness dates of all 35 LIBOR settings on 5 March 2021. All GBP, EUR, CHF, JPY, and some lesser used USD LIBOR tenors, will cease publication after 31 December 2021. The remaining USD LIBOR tenors will cease publication after 30 June 2023. Please see the FCA announcement on 5 March for further details on the cessation of each LIBOR setting.

ARRs 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 TONA - 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 ARRs take 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 the publication of most tenors of LIBOR 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 an ARR means now.

As the industry considers how and when it will transfer to ARRs, it is important to note that the timing of changes may vary based on the currencies, products and participants involved. As a result, regulators and industry groups recommend that financial markets participants take measures to understand their exposures to LIBOR and prepare for its cessation.

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, including whether you require guidance or support from professional advisers.

Preparation may include, understanding:

  • your exposures to LIBOR and how existing transactions may behave when 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 and the proposed ARR replacement
  • Industry target dates for the cessation of new transactions for specific LIBOR products and currencies.
  • the implications of ‘linked products’ with LIBOR exposure, for example a derivative hedging a loan. Please discuss these implications with your Macquarie representative.
  • other impacts that the transition from LIBOR to an ARR may have on your business.

Greater clarity on LIBOR transition is emerging as the financial services sector finalises its work on many 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 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 IBORs that may be subject to reform, including BBSW, EURIBOR and TIBOR.

What is Macquarie doing for its clients?

  • Macquarie is transacting 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.
  • Macquarie can provide various alternatives and solutions to transition legacy LIBOR exposures; however, this will vary by product and currency so please contact your Macquarie representative to discuss 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.

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

IBOR Transition FAQs

Information about EONIA cessation

Industry resources

Contact our Global IBOR Transition Team

This page was last updated on 27 September 2021.

  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 ARRs as Risk-Free Rates (RFR) or Alternative Risk-Free Rates (ARFR)