Getting ready for the transition from IBOR to risk free rate
Major structural changes in the global financial markets on interest rate benchmarks are now under way. Central banks and regulators in a number of key jurisdictions are committed to a transition away from the various Interbank Offered Rates (IBORs) to alternative rates expected to be more robust and less vulnerable to manipulation.Following the LIBOR scandal in the 2010’s, the G20 asked the Financial Stability Board (FSB) to undertake a fundamental review of major interest rate benchmarks in response to manipulation events and a decline number of market transactions used to calculate LIBOR.
The Financial Stability Board suggested a ‘multi-rate’ approach to reforming interest rate benchmarks across currencies, with a view to strengthening existing benchmarks to the greatest extent possible with transaction data and better governance processes across contributors, as well as developing risk-free rates.
Transitioning from IBORs to alternative rates requires replacing the interest rate benchmarks used for financial transactions and will impact Natixis’ products that reference IBOR or are hedged using IBOR.
Natixis is actively involved in preparing the transition from the IBORs and is committed to assist its clients throughout the process.