Reforming Major Interest Rate Benchmarks
This progress report on the implementation of the FSB’s recommendations to reform major interest rate benchmarks finds that administrators of major interbank offered rates (IBORs) have continued to take steps to implement the FSB recommendations since the last progress report published in July 2015. The report finds progress has been made by the three major benchmarks of EURIBOR, LIBOR and TIBOR. Reflecting the systemic importance of these reference rates authorities in the European Union, Japan and United Kingdom have taken steps to regulate the administrators of the IBORs. Member authorities represented on the Official Sector Steering Group (OSSG), benchmark administrators and market participants from other jurisdictions, including Australia, Canada, Hong Kong, Mexico, Singapore and South Africa, have continued to take steps to improve the existing interbank rates in their own jurisdiction.
However, the report finds that while substantial progress has been made, the reforms of the IBORs have not been completed. Administrators should now focus on transition and decide how to anchor rates in transactions and objective market data as far as practicable. Similarly, it finds that more progress remains to be achieved in identifying risk-free rates (RFRs) and promoting their use where appropriate. Where groups have been set up to identify a single alternative and to promote its use, the final choice has yet to be made and transition planning is still in preliminary stages.
The major interest reference rates are widely used in the global financial system as benchmarks for a large volume and broad range of financial products and contracts. The cases of attempted market manipulation and false reporting of global reference rates lowered confidence in the reliability and robustness of existing benchmark interest rates. Uncertainty surrounding the integrity of these reference rates represented a potentially serious source of vulnerability and systemic risk. Against this background, in February 2013, the G20 asked the FSB to undertake a fundamental review of major interest rate benchmarks. In July 2014 the FSB published the recommendations for reform developed by the OSSG. The OSSG published its most recent progress report in July 2015.