IBOR reform

Paving the way for transition towards an IBOR-free world.

InterBank Offered Rates (IBORs) were and still are, far ranging and utilised in most of financial instruments including Over-The-Counter (OTC) derivatives and Exchange-Traded Derivatives, syndicated loans, securitized products, business loans, retail loans, floating rate bonds and deposits.

The 2008 financial crisis and the LIBOR manipulation scandal have revealed the limitations of this benchmark and have raised important questions regarding its reliability. The Wheatley Report in 2012, followed by the FSB’s report two years later, the new European Benchmark regulation and finally the announcement by the FCA’s Andrew Bailey about the end of LIBOR have all set a path toward the benchmark reform. And now, dedicated working groups across the various FSB members’ jurisdictions are selecting and developing alternative Risk Free Rates (RFR) to replace the existing benchmarks.

^*source: 2014 final report Market Participants Group on Reforming Interest Rate Benchmarks

Challenges for the Industry

The transition from LIBOR is complex, challenging and depends on an individual company’s business and processes. RFRs have been determined but are very different, by nature, from LIBOR and also less homogeneous in their construction. Transitioning to RFRs is a complex project that will have organisational and technical impacts along the value chain of transactions. The change needs to be started as early as possible and, delaying is not an option. Continuing to issue new IBOR-linked contracts which mature when RFR products have become a viable alternative, may lead to damaging financial, customer and operational impacts.

How Mazars can help

Mazars support its clients in their transition process and offering end-to-end solutions and bespoke services. From the identification and mapping of IBOR-related exposures to the implementation of a robust transition program our expert team have experience of working with a diverse range of financial services players. See the brochures below to see how we can help you.

Mazars IBOR tool

Our proprietary Mazars IBOR Tool measures and monitors IBOR risk in our clients’ portfolios, assisting them to develop structured and optimised strategy.

Screen Contracts to capture any relevant information to access the risks you are facing
Perform Exposure Analysis (per asset class, currency and maturity)
Perform Sensitivity Analysis on a change in benchmark rate and impact assessment
Monitor New RFRs’ Liquidity