London Interbank Offered Rate (LIBOR) and other interest rate benchmarks

In 2014 the Financial Stability Board (FSB) and central banks around the world sought to reform interest rate benchmarks used in financial contracts. They recommended both the reform of existing LIBOR benchmarks and the development of new Risk Free Rate (RFR) benchmarks. In 2017 the UK’s Financial Conduct Authority, which regulates LIBOR, announced that it would no longer compel banks on the LIBOR panels1 to submit rates after the end of 2021. This accelerated the transition away from the market’s use of LIBOR, as well as other comparable benchmarks2, to RFRs3. The financial products this potentially affects include derivatives, loans, floating rate bonds, mortgages, among others. This means that contracts that reference LIBOR and that mature after 2021 are likely to be impacted by this reform, including products and services transacted with CIBC. While the specific economic impacts of this transition are not yet clear, the new RFRs differ from LIBOR benchmarks in some important respects. We advise that you consult with your financial and legal advisors on the possible effects of LIBOR reform on your organization.

Benchmark reform poses challenges for the entire financial services industry and its clients, given both the scope and the evolving nature of the transition. CIBC has a transition team in place that is monitoring developments and will endeavor to keep you informed as new information becomes available. The link below will direct you to additional background information on the status of the reform.

LIBOR Transition

If you have any questions, please contact us at [email protected].

1 The LIBOR currencies include USD, GBP, EUR, JPY, CHF and panel members submit rates across 7 different tenors (spot/next, 1 week, 1 month, 2 months, 3 months, 6 months and 12 months).

2 Comparable benchmarks include but are not limited to CDOR in CAD, EURIBOR in EUR, BBSW in AUD etc.

3 Risk Free Rates include but are not limited to SOFR in USD, SONIA in GBP, ESTR in EUR, CORRA in CAD, Cash Rate in AUD etc.