What are IBORs?

Interbank Offered Rates (IBORs) are the average rates at which banks can borrow in the interbank market and range in maturities from overnight to 12 months. The rates are calculated using submissions from a number of panel banks. IBORs are widely used as reference rates by market participants across nearly all asset classes, including: derivatives, bonds, loans, and other financial instruments.

IBOR Cessation

A global interest rate benchmark reform effort has been undertaken to improve the durability, robustness, and sustainability of the most widely used IBORs; encouraging the industry to move from bank credit rates to alternative risk-free rates (RFRs).

Alternative Rates Across the Globe

What are the IBOR alternative replacement rates?

Regulators around the world have tasked committees comprised of market participants to identify and recommend a successor rate in each country. These successor rates are outlined below.

Country IBOR Cessation Date Alternative rate Target Date to cease use of IBOR
USA USD LIBOR Dec 31, 2021
(USD LIBOR settings on 1W and 2M)
June 30, 2023
(remaining USD LIBOR settings)
(Secured Overnight Financing Rate)
Dec 31, 2021
(exception: new derivatives to hedge loans entered into before Dec 31, 2021)
(Sterling Overnight Interbank Average Rate)
March 31, 2021
Europe EUR LIBOR Dec 31, 2021 €STR
(Euro Short Term Rate)
Dec 31, 2021
Europe EONIA Dec 31, 2021 Dec 31, 2021 Dec 31, 2021
Switzerland CHF LIBOR Dec 31, 2021 SARON
(Swiss Average Rate Overnight)
Dec 31, 2021
Japan JPY LIBOR Dec 31, 2021 TONA
(Tokyo Overnight Average Rate)
Dec 31, 2021
Canada CDOR June 28, 2024 CORRA
(Canadian Overnight Repo Rate Average)
June 28, 2024
(no new derivatives/ securities allowed after June 30, 2023; new derivatives that hedge or reduce CDOR exposures of derivatives or securities transacted before June 30, 2023 or in loan agreements transacted through until June 28, 2024 allowed.)

Key differences between IBORs and RFRs

Transaction based? No – bank submission based on expert judgement (Unsecured) Yes – Repo Transactions (Secured) Yes – Money Markets (Unsecured) Yes – Money Markets (Unsecured) Yes – Repo Transactions (Secured) Yes – Money Markets (Unsecured) Yes – Repo Transactions (Secured)
Term Structure Yes – multiple maturity tenors (Forward-looking) Yes – Overnight rate (Backward-looking). Term SOFR (Forward-looking) No – Overnight rate (Backward-looking) No – Overnight rate (Backward-looking) No – Overnight rate (Backward-looking) No – Overnight rate (Backward-looking) No – Overnight rate (Backward-looking). Term CORRA may be available at a later date
Includes credit risk? Yes – Bank lending rate (includes credit risk) RFR (no credit risk) RFR (minimal/no credit risk) RFR (minimal/no credit risk) RFR (no credit risk) RFR (minimal/no credit risk) RFR (no credit risk)

Impact of IBOR Transition

There are inherent structural differences between IBORs and RFRs. Adjustments are needed to the RFRs to ensure that contracts which reference an IBOR continue to meet the parties’ original objectives as much as possible once a fallback takes effect. While the economics of RFR transactions will be similar to those under the existing IBOR product, it is impossible to say on any particular day that they will be identical.

Industry Recommendations

Key Developments and Milestones

Supporting Your IBOR Transition

CIBC is actively engaging with industry bodies and market participants to support a smooth transition away from LIBOR. Internally, CIBC has put into place a comprehensive IBOR Transition Program that covers all aspects of the transition, including client communication, contract digitization & remediation, operational readiness, product transition strategy, risk management and financial controls.

CIBC recommends that you review your firm’s IBOR exposures, as well as contracts with IBOR reference, and work with your independent financial and legal advisors to ensure you are ready for the transition event. You should also ensure your systems, models and processes are updated to handle the alternative RFRs. Finally, as there is still some uncertainty around the transition, as highlighted above, we recommend that you continue to closely monitor market developments. CIBC will make every effort to inform you of any significant market developments.