IBOR Transition

Unsecured short-term interbank funding in the IBOR market (“InterBank Offered Rates”) has declined dramatically following the 2012 rate-fixing scandals and its integrity has been openly called into question. In July 2017, the UK’s Financial Conduct Authority declared that it would no longer persuade or compel banks to submit their interbank borrowing rates after 2021. While central bank-led working groups have been convening since 2014 to establish appropriate Alternative Reference Rates (“ARRs”) for each IBOR currency, the FCA’s triggering event has solidified the need for financial market participants to prepare for the impending cessation of IBORs. Given outstanding uncertainties in the working groups’ determination of ARRs per currency, calculating IBOR exposures and establishing a transition plan is critical in advance of 2021 while there still remains sufficient time to proactively manage the market, accounting, and legal risks. This White Paper describes Quaternion’s IBOR-related services aimed at helping financial market participants prepare for 2021:

  1. Evaluation of existing IBOR exposures and hedge effectiveness, including stress testing
  2. Portfolio compression of IBORswhile maintaining the same duration-adjusted exposure
  3. Quantitative support during legal renegotiations of derivative and loan documentation
  4. Calculation of go-forward spread and tenor adjustments to equalize ARRs and LIBORs

Download the Whitepaper