GFMA IBOR Transition Materials

Transitioning from Interbank Offered Rates (IBORs) to new Risk Free Rates (RFRs)* September 2019

In recent years, international and domestic authorities alike have actively These documents have been updated from their previous versions (April worked with the private sector to address LIBOR’s shortcomings and to 2019) to include rates for the Australian dollar, Canadian dollar, Hong find alternative rates. In 2013, the International Organization of Securities Kong dollar and Singapore dollar in addition to the currencies included in Commissions (IOSCO) developed an international set of principles the initial documents (Japanese yen, Euro, UK pound sterling, U.S. dollar for financial benchmarks. These principles—which include 19 specific and Swiss franc). standards across governance, benchmark quality, methodology, and accountability—have emerged as the international standard. IOSCO has The information contained herein is based on the work of the FSB rightly focused on tying benchmarks more closely to observable, arms- through the OSSG as well as other publicly available information. For length transactions. ongoing IBOR transition updates, please reference the individual central bank working groups: The Financial Stability Board (FSB) and its members have published proposals, plans, and timelines for reference rate reform and have • Japanese yen: Study Group on Risk-Free Reference Rates and the promoted the strengthening of the major interest rate benchmarks. The Bank of Japan Cross-Industry Committee on Japanese Yen Interest FSB and its members have been carrying out work on the development Rate Benchmarks and introduction of alternative benchmarks, developing a plan to • Euro: Working Group on Euro Risk-Free Rates accomplish a transition to new benchmarks, encouraging work by the private sector on contract robustness, and reporting regularly on the • UK pound sterling: Working Group on Sterling Risk-Free Rates progress made. • U.S. dollar: Alternative Reference Rates Committee To aid in the awareness of the IBOR transition processes impacting • Swiss franc: National Working Group on Swiss Franc Reference Rates globally-active financial institutions, the Global Financial Markets Association (GFMA) has created the following documents outlining the • Australian dollar: Reserve Bank of Australia Market Operations Resources various parts and players. This information is organized into the enclosed three products: • Canadian dollar: Canadian Alternative Reference Rate Working Group

1. Key Timelines and Milestones for the transition from IBORs to RFRs;

2. S napshot of the IBOR and RFR variables associated with each currency;

3. ‘At a Glance’ Tracker of each official sector working group activities and near-term expected actions.

*Current as of September 2019

1 IBORs to RFRs Transition Timeline This timeline lists key dates and milestones associated with the transition from IBORs to risk free rates for the Japanese yen, Euro, UK pound sterling, U.S. dollar, Swiss franc, Australian dollar, Canadian dollar, Hong Kong dollar and Singapore dollar.

ECB publishes summary of responses Legend for the third public BoJ publishes public Bank of Canada Recommends consultation by the consultation on the to become JAPAN TONAR be working group on appropriate choice and administrator EMMI announces end calculated by Euro risk-free rates on usage of Japanese Yen of CORRA to efforts on EONIA EU BOJ the EONIA to ESTR Interest rate benchmarks reform. Selects €STR as legal action plan UK replacement for EONIA EMMI receives license for CARR plans Some EMMI concludes the administration of Euribor to implement Australia Cash Rate EURIBOR recalibration from the Belgian FSMA enhanced WG publishes methodology tenors cease of EONIA methodology responses to Term WG Euro RFR US introduced to exist methodology as for CORRA Publishes Sonia Reference Rates €STR + 8.5bp as ECB Recommendations Switzerland (TSRR) consultation of October 2019 publishes on the Legal Action €STR WG publishes “Next Plan for Transition Conversion Canada mechanisms Steps” paper on from EONIA to €STR HK development of consulted Expects discussion on and TSRR and issuance Releases roadmap paper on legacy developed SG of first SONIA-linked by Working Group cash products for GBP securitisation [retained and findings of the referencing GBP LIBOR to Other regulatory on balance sheet] “Dear CEO” letters LIBOR SONIA milestones

May Dec Sept Sept Nov Dec May June July Q4 Oct Q1 Q2 2016 2016 2016 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019 2020 2020 2020 2021 2022

Oct Dec Apr July Oct Mar Q2 April Aug Early July Oct Q1 Q4 End of Start of 2017 2017 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2021 2021 2021 2022

Fed Final recommendations CME plans Expect publishes for fallback contract discounting term SOFR language for FRNs, switch from daily publication bilateral business effective federal of SOFR Transitional funds rate ABS-SFEMC loans, syndicated loans provisions of and securitizations (EFFR) to SOFR issues MAS establishes the Benchmark consultation Regulation steerco to LCH plans on enhancing expire. BMR Recommends ARRC releases a facilitate SOR discounting SIBOR comes into force Recommends compounded user guide for SOFR transition to SORA switch to SOFR SARON SARON as term encouraging transition EONIA new reference rate ABS-SFEMC issues FCA no business after ABS-SFEMC develops WGARR releases consultation on Enhanced longer this date must proposal to strengthen consultation on SORA transition SIBOR to be compels reference €STR SIBOR based on refinements for from SOR implemented panel consultation responses HONIA as ARR banks to Basel III BIS releases a FSB publishes Expected Data collection begins on submit and FRTB primer on the new user guide for finalized ISDA model-ability criteria for LIBOR implementation benchmark rates overnight RFRs fallback language FRTB implementation quotes goes live

2 Snapshot: Variables of each IBOR and RFR by Jurisdiction The following lists out the key factors to be aware of in each IBOR and risk-free reference rate.

Reformed IBOR include Alternative Alternative RFR Transaction Overnight Secured/ Underlying Rates Jurisdiction Benchmark IR Administrator waterfall RFR Administrator based? rate? Unsecured Transactions Published approach?

JBA TIBOR JBA TIBOR Yes Yes EUROYEN Administration TIBOR Money TONA Bank of Japan Yes Unsecured July 1985 Markets Japan ICE Benchmark JPY LIBOR Administration Yes Yes (IBA)

Euro short- term rate Yes October EONIA/ European Money (€STR) European Yes Money 2019 EURIBOR Markets Institute Yes Central Bank Unsecured (€STR) Markets (€STR) (EMMI) (ECB) Reformed EU Partly EURIBOR

Reformed sterling ICE Benchmark overnight Bank of Money 23 April GBP LIBOR Administration Yes Yes Yes Unsecured index England Markets 2018 (IBA) UK average (SONIA)

Secured Federal ICE Benchmark overnight Reserve Bank Repo USD LIBOR Administration Yes Yes Yes Secured 3 April 2018 financing of New York Transactions (IBA) US rate (SOFR) (FRBNY)

Swiss ICE Benchmark average rate SIX Swiss Repo 25 August CHF LIBOR Administration Yes Yes Yes Secured overnight Exchange Transactions 2009 (IBA) (SARON) Switzerland

3 Snapshot: Variables of each IBOR and RFR by Jurisdiction The following lists out the key factors to be aware of in each IBOR and risk-free reference rate.

Australian RBA Cash Reserve Bank Current Bank Bill Swap Cash Market Methodology Securities Yes Rate of Australia Yes Yes Unsecured Rate (BBSW) Transactions Introduced Exchange (ASX) (AONIA) (RBA) Australia May 2016

Thomson Refinitiv Enhanced Reuters – transferring CORRA Repo CDOR Refinitiv No CORRA to Bank of Yes Yes Secured to be Transactions Benchmark Canada in Published Canada Services 2020 Q2 2020

Overnight Hong Kong Interbank Hong Kong Enhanced Treasury Deals Treasury Markets HONIA HIBOR No HONIA Markets Yes Yes Unsecured Routed Association yet to be Association Through (TMA) published Hong Kong (TMA) Money Brokers

The Association None SIBOR of Banks in Yes Selected Singapore (ABS)

Unsecured overnight Monetary Published The Association SORA interbank Authority of daily by Singapore SOR of Banks in pending Yes Yes Unsecured SGD Singapore MAS since Singapore (ABS) consultation transactions (MAS) July 2005 brokered in Singapore

4 At a Glance: Official Sector Working Group Activities and Near-Term Expectations This tracker follows the official sector working group activities, near-term expected actions, industry actions around cash fallback language, term rate statuses, and issuance of alternate RFRs to date.

Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to Date Group Structure RFR Status Language Status Status Actions

The Cross-Industry December 2016: Future work plan for The Committee released Committee on Yen Interest Recommended Tokyo term reference rate a Public Consultation Rate Benchmarks is divided Overnight Average Rate based on Swaps and on the Appropriate into three subgroups and (TONA) calculated by the Futures is discussed in Choice and Usage of one working group Bank of Japan. the subgroup for the Japanese Yen Interest Bank of Japan Study focusing on: development of term Rate Benchmarks on 2 Group on Risk-Free reference rates. The July 2019 1. Loans Reference Rates subgroup considers Cross-Industry 2. Bonds possible timing of the implementation is Committee on 3. Development of term around mid-2021. Japanese Yen Interest reference rates Rate Benchmarks 4. Currency Swaps

The Euro Working Group September 2018: Euro WG “Guiding On 25 Feb, the WG There is no issuance in (WG) currently has five Recommended €STR to principles for fallback published a summary €STR yet. sub-groups, focusing on: replace EONIA. provisions in new of responses to contracts for euro- the second public 1. Term rate methodology ECB will begin publishing denominated cash consultation on for euro short-term rate €STR by October 2, 2019. Working Group on products” published determining an €STR- Euro Risk-Free Rates 2. Best practices for February 2019: in 2019 to promote based term structure contract robustness and Euro WG confirms effective fallback methodology as legacy contracts EURIBOR will continue for provisions in new a fallback in euro the medium term. contracts for euro- interbank offered rate 3. Identification and denominated cash (EURIBOR) linked adoption of RFRs for cash products. contracts. products and derivatives In 2019, the WG The ECB has 4. Risk management and intends to recommend announced a call accounting issues more detailed fallback to benchmark 5. Communication and language. Much of this administrators for education with market is outlined in the WG expressions of interest participants Legal Action Plan. in administering an €STR-based forward-looking term structure. The WG may seek further input from market participants through additional consultations.

5 At a Glance: Official Sector Working Group Activities and Near-Term Expectations (continued)

Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to Date Group Structure RFR Status Language Status Status Actions

The WG is broken down into April 2017: GBP fallback language The RFRWG A 2019 focus will be To date there have been 68 sub-groups focusing on: Recommended reformed expected to be have confirmed on development of issues of sterling floating Sterling Overnight Index agreed in 2019. FTSE Russell, operational capability rate notes which reference 1. Bonds Average (SONIA). ICE Benchmark for SONIA-referencing SONIA with total volume of Bank of England 2. Loans Administration, floating rate notes £33.6 bn, this is in addition Working Group on Refinitiv and HIS (FRNs), loans and other to 18 sterling securitisation 3. Communications Sterling Risk-Free Markit are working instruments. A term deals referencing SONIA & Outreach Rates (RFRWG) on development benchmark rate will be with total volume of £16.7bn. 4. Pension Funds & of a Term SONIA produced and made There has also been 1 Insurance Companies Reference Rate. available to use. corporate loan to National Express which references 5. Infrastructure The RFRWG maintains SONIA. 6. Term Rates (Task Force) “Working Group Timeline and Milestones.” 7. Accounting/Tax (Task Force) 8. Regulatory Dependencies (Task Force)

The WG is broken down into June 2017: Recommended ARRC agreed on ARRC’s Paced ARRC to publish CME Group launched sub-groups focusing on: Secured Overnight principles for fallback Transition Plan sets recommended fallback 3-month and 1-month SOFR Financing Rate (SOFR) language, published end of 2019 goal to language for adjustable futures trading on 7 May 1. Accounting/Tax as the RFR to replace U.S. late Sept 2018. produce a forward- rate mortgages after 2018. LCH began clearing 2. Business Loans dollar LIBOR. looking term rate for the completion of their SOFR swaps in July 2018. Alternative Reference In Q2 2019, the use in certain cash consultation. Rates Committee 3. Consumer Products April 2018: New York ARRC released SOFR-based bond products. (ARRC) Federal Reserve The ARRC will continue issuances in recent months 4. Floating Rate Notes recommended Bank (NYFRB) began fallback contract The FRB published to pursue regulatory include Fannie Mae, Credit 5. Legal publication of SOFR. language for bilateral various sets of data and other obstacles to Suisse, Wells Fargo, Met business loans, on indicative forward- a transition away from Life, the Federal Home Loan 6. Market Structure and floating rate notes, looking SOFR term SOFR. It is also exploring Bank system and the World Paced Transition securitizations and rate data (last update educational and outreach Bank. There have been 289 7. Operations/Infrastructure syndicated loans. April 2019) objectives and plans. issues of U.S. dollar notes referencing SOFR with total 8. Outreach/ In July 2019, ARRC volume of $292bn Communications opened a consultation 9. Regulatory Issues for fallback contract language for 10. Securitizations adjustable rate 11. Term Rates mortgages.

The WG is broken down into October 2017: WG has On 29/10/2018 Eurex sub-groups focusing on: Recommended Swiss recommended using launched 3M SARON Overnight Average Rate compounded SARON Futures 1. Derivatives & Capital (SARON). wherever possible Markets National Working 2. Loan and Deposit Markets Group on Swiss Franc Reference Rates

6 At a Glance: Official Sector Working Group Activities and Near-Term Expectations (continued)

Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to Date Group Structure RFR Status Language Status Status Actions

RBA recognizes three BBSW has been BBSW has been RBA and relevant The current calculation working groups related to strengthened and will strengthened and regulators will continue methodology for AONIA was interest rate benchmark continue to be published will continue to be to monitor both BBSW introduced in May 2016. reform. going forward. published. and AONIA. South Australian Reserve Bank of 1. ASX BBSW Advisory AONIA is being published RBA evaluated that Government Financing Australia Interest Committee focuses on as an RFR in as part of a there are enough Authority (SAFA) launched Rate Benchmark BBSW Benchmark “multiple rates” approach. transactions to an AONIA linked AUD Reform Page determine BBSW and floating rate note. The 2. Australian Financial that it will continue issue amount was A$500 Markets Association to exist as part of a million and it was launched (AFMA) focuses on multi-rates approach. with UBS as the Arranger promoting industry and Sole Lead Manager, dialogue and information and IHS Markit as the sharing calculation agent. 3. Australian Securitisation Forum (ASF) established a working group to consider benchmark reform on the Australian Securitisation Market

The Canadian Alternative CARR endorses an CARR developed CDOR will continue Fallback language will CORRA exists in the market, Reference Rate Working enhanced CORRA based Principles for to exist as a part be finalized after ISDA but enhanced CORRA is still Group (CARR) is sponsored on the recommendations Enhancements to of a multiple rates finishes itsconsultation under development and has by the Canadian Fixed- outlined in their Fallback Language. approach. on fallback language for not yet been published. Income Forum (CFIF) consultation paper with CDOR and other rates. Canadian Alternative which is a group set up by no changes based on CARR and CFIF will Reference Rate the Bank of Canada. Both responses. monitor and review issues Working Group groups are comprised CFIF endorses for transition from CORRA of market participants monitoring and reviewing to an enhanced CORRA. and Bank of Canada issues for transition by representatives. Bank of Canada to the transition subgroup become CORRA and by the benchmark administrator in 2020. admin.

7 At a Glance: Official Sector Working Group Activities and Near-Term Expectations (continued)

Working Working Group Alternative/New Cash Fallback Term Rate Near Term Expected Issuance to Date Group Structure RFR Status Language Status Status Actions

As HONIA’s administrator, The WGARR has HIBOR will continue Technical adjustments HONIA exists in the market, the TMA established an proposed technical to exist as a part may be made to HONIA but the updated HONIA has internal Working Group on refinements to HONIA of a multiple rates based upon industry not yet been developed. Alternative Reference Rates outlined in an April 2019 approach. feedback to the (WGARR). consultation paper. consultation paper. TMA may also try to Hong Kong Treasury Refinements relate to develop an OIS curve There are no plans to Markets Association the rate’s data source, for HONIA depending discontinue HIBOR and a Working Group on reporting window and on market conditions multi rate approach will Alternative Reference publication time. and demand. be adopted using both Rates “WGARR” HONIA and HIBOR. The TMA and WGARR plan to issue a paper Fallback language will based on feedback be developed after ISDA received by industry finishes itsconsultation stakeholders. on fallback language for HIBOR and other rates.

MAS has established a The ABS Benchmarks Co SIBOR will continue to Enhanced SIBOR will SORA is currently under Steering Committee for Pte td and the Singapore be published. go through testing and consultation to replace SOR. SOR Transition to SORA Foreign Exchange Market transition late 2019 – early SORA has been published An enhanced SIBOR (SC-STS). Committee (ABS-SFEMC) 2020. since July 2005. will be implemented in have worked together to late 2019 – early 2020. ISDA released a Steering Committee develop a proposal to consultation for fallback for SOR Transition to strengthen SIBOR. ABS- language suggesting that SORA (SC-STS) SFEMC also released SOR reference SOFR as a consultation on the a fallback rate. Fallback proposed transition from language may be adopted SOR to SORA. for SOR to reference SOFR in place of USD LIBOR for derivative contracts. ABS-SFEMC released a consultation on the roadmap for transition from SOR to SORA in August 2019.