Preparing for Interbank Offered Rate (IBOR) Transition

Preparing for benchmark interest rate reform

Benchmark interest rates are widely used across the global economy for calculating interest rates and valuations in relation to a wide variety of financial contracts, such as derivatives, bonds, loans, consumer lending products.

Global regulators are concerned about the robustness of benchmark interest rates such as LIBOR and expect market participants to plan for no LIBOR publication after the end of 2021.

LIBOR Cessation Update

The majority of LIBOR panels ended at the end of 2021, meaning their settings ceased or are permanently unrepresentative. 

The LIBOR settings that have ended are: 

  • all euro and Swiss franc LIBOR settings
  • the overnight / spot next, 1-week, 2-month and 12-month sterling and Japanese yen LIBOR settings
  • the 1-week and 2-month US dollar LIBOR settings

It has been announced that USD LIBOR will remain published and representative for overnight, 1-month, 3-month, 6-month and 12-month US dollar LIBOR settings until end-June 2023, when transition to appropriate alternative rates will occur. Barclays will follow US Federal Reserve guidance on reducing USD LIBOR exposures, including following SOFR First principles and restrictions on new USD LIBOR exposures (see US updates section below). 

Barclays is aware that transition to alternative rates, often referred to as Risk Free Rates (RFRs) differs for those currencies where LIBOR has ceased to be published and/or representative. It is also at a differing stage with specific relation to US Dollar LIBOR. Barclays continues to expect that the timing of remaining transitions away from relevant interbank offered rates will take into account a number of factors:  regulatory requirements, liquidity in the replacement RFR, the potential development of robust RFR-based term rates, development of any relevant industry conventions and the speed with which participants in the various derivative, bond and lending markets transition away from interim LIBOR rates, known as Synthetic LIBOR, or USD LIBOR. While we expect that all of the aforementioned factors are taken into account in terms of transition, we must be clear that the process is bound by regulatory deadlines.

Please note Synthetic LIBOR is defined and explained below, in the GBP updates section.

We have followed the milestones set out by the various Risk-Free Rate Working Groups with respect to providing LIBOR-linked products maturing after the end of 2021, and continue to explore ways to reduce our remaining footprint in relation to LIBOR-linked products. 

Background, approach and how to prepare

  • Background

    For several years, global regulators and central banks have been driving international efforts to reform key benchmark interest rates to make them more reliable. These reforms are happening in many jurisdictions, such as the United Kingdom, the Euro area, the United States, Switzerland, Canada, Japan, Hong Kong, Singapore and Australia.

    A key focus of these reforms is to ensure that widely used benchmarks are credible and robust. Regulators have been clear that this means benchmarks should be based upon transactions to the greatest extent possible. 

    In July 2014, the Financial Stability Board, an international body that monitors and makes recommendations intended to promote financial stability, issued a report expressing concerns about the ‘reliability and robustness of existing interbank benchmark rates.  The Financial Stability Board recommended a two pronged approach to reform benchmarks.

    1. Strengthen existing Interbank Offered Rates (IBORs) by underpinning them to the greatest extent possible with transactions data
    2. Develop alternative, nearly risk-free reference rates (RFRs)

    What is LIBOR & why is it being replaced?
    The London Interbank Offered Rate (“LIBOR”) is a daily benchmark interest rate calculated as an average of panel bank submissions and provides indication on the rate banks pay to borrow unsecured money across five currencies (British Pound Sterling, Euro, Japanese Yen, Swiss Franc and US Dollar) and seven tenors (overnight, 1 week, 1, 2, 3, 6 and 12 months) and used for the purposes of financial contracts, as a reference rate; including for calculating interest. Its administrator, ICE Benchmark Administration (IBA), publishes LIBOR rates every applicable London business day. LIBOR is widely used across the global economy for calculating interest rates and valuations in relation to a wide variety of contracts, such as derivatives, bonds, loans and consumer lending products.

    Despite reforms in the governance and submission methodology of LIBOR, which now anchor the benchmark in “transactions to the greatest extent possible”, few transactions in the short-term money market actually occur now as banks have changed the way they fund themselves. Regulatory measures implemented after the 2008 financial crisis, to strengthen banks’ balance sheets, have reduced the utility of unsecured interbank borrowing in the money markets. These are the same transactions upon which LIBOR submissions are based.

    Regulators’ concerns about the continued use of LIBOR remain elevated. In a key regulatory speech in 2017, the Chief Executive of the Financial Conduct Authority (FCA), Andrew Bailey, clearly articulated the continuation of LIBOR was at risk: “Our intention is that, at the end of [2021], it would no longer be necessary for the FCA to persuade, or compel, banks to submit to LIBOR.  It would therefore no longer be necessary for us to sustain the benchmark through our influence or legal powers.”

    More recently at an Alternate Reference Rate Committee Roundtable speech in 2019, Randal Quarles, Chair of The Financial Stability Board, stressed that the “ Clarity on the exact timing and nature of the LIBOR stop is still to come, but the regulator of LIBOR has said that it is a matter of how LIBOR will end rather than if it will end, and it is hard to see how one could be clearer than that.”

    The United Kingdom’s Financial Conduct Authority (FCA) published an announcement  on  5 March 2021 on the future cessation and loss of representativeness of LIBOR benchmarks.

    The FCA’s announcement confirms that all LIBOR settings will either cease to be published by an administrator or be provided on a representative basis in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings immediately after 31 December 2021. The same will apply to the remaining US dollar settings after 30 June 2023 (see here for further detail)” (link goes to FCA section at top of page)

    A keynote speech was delivered by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the FCA, at the UK Finance's Commercial Finance Week on 5 July 2021, emphasising that, with 6 months to go until LIBOR ceases, efforts should be sustained in order to maintain momentum of the transition.

  • What is replacing LIBOR

    Global regulators formed currency-specific working groups to assess market conditions, examine alternatives and consider next steps. Members of these working groups include banks, asset managers, insurance companies, and corporates. Industry bodies and trade associations representing various segments of the market are also actively engaged.

    These efforts have resulted in the identification of Risk-Free-Rates (RFRs), for each of the LIBOR currencies, which are based upon overnight transactions; however, these are not the only identified alternatives. While it is expected that RFRs will become the norm for derivatives, securities and wholesale loans, regulators have highlighted the usage of other variable rates or fixed rates for some market participants.  An example of this in the UK, is the Bank of England Bank Rate, which is already widely used in mortgages and for some retail lending where simplicity and transparency of the rate are seen as priority. 

    Currency Existing Rate Alternative Rate Transaction Type
    USD LIBOR SOFR, Secured overnight financing rate Secured
    EUR* LIBOR, EURIBOR €STR, Euro short term rate Unsecured
    GBP LIBOR SONIA, Sterling overnight index average Unsecured
    JPY LIBOR TONA, Tokyo overnight average Unsecured
    CHF LIBOR SARON, Swiss average rate overnight Secured

    The Euro Short Term Rate (“€STR”) is intended to replace the Euro Overnight Index Average (“EONIA”), at the end of 2021. No potential cessation date has been given for EURIBOR 
    For information on other key jurisdictions please download our world map (PDF 315KB)

    What is happening with EURIBOR & EONIA?

    EURIBOR, (EURO Interbank Offered Rate) completed reforms of its methodology in Q4 2019. The European authorities believe reformed EURIBOR can exist beyond 2021, and no indication has been given that the benchmark is likely to cease anytime soon. However, EONIA, the Euro Overnight Index Average, became increasingly fragile in recent years. Consequently, the methodology was changed in October 2019 and EONIA became a tracker rate to €STR, the RFR identified by the Euro working group. It is expected publication of EONIA will cease on 3 January 2022.

    What are RFRs?

    The acronym “RFR” was introduced by the Financial Stability Board in their 22 July 2014 publication on benchmark interest rate reform.  The phrases ‘near risk-free rates’, ‘risk-free rates’ and ‘alternative reference rates’ are generally accepted as interchangeable and these should be considered to refer to the same: reference rates which are being developed by international, central bank led working groups as alternatives to LIBOR.

    RFRs have a number of differences when compared to LIBOR, including:

    • Each currency has its own distinct RFR and administrator;
    • RFRs are overnight rates, not rates for a longer term such as three or six months. As such, there is very little perceived credit risk or term premium associated with RFRs;
    • Some market participants have expressed the need for a RFR based term rate, in order to know the applicable interest rate in advance of any payments to be made. Each of the RFR working groups is considering if it will be feasible to produce a robust term rate. The Swiss group has stated it will not be possible in that market;
    • RFRs are based on a large number of overnight money market transactions, so the risks associated with expert judgment do not arise;
    • The underlying volumes representing the indices which determine the RFRs are much higher than LIBOR;
    • Whilst all LIBORs are unsecured rates not backed by any exchange of collateral, two of the five RFR working groups selected secured, or collateralised, rates for their respective currencies based on transactions in their respective government security repo markets.
  • Risks to consider

    The path to transition away from LIBOR is complex. The alternative reference rates are calculated on a different basis to LIBOR. Market and industry conventions for alternative reference rates are expected to vary between certain products and markets; these conventions continue to develop and may change over time. Various jurisdictions are at different stages of transition, and are moving at different speeds towards, potentially different outcomes. It is difficult to imagine a ‘one size fits all’ approach or solution.

    Transition will affect both new and existing products referencing these key interest rate benchmarks. The consequences of reform are unpredictable and may have an adverse impact on any financial instruments linked to, or referencing, any of these benchmarks.

    Counterparties that hold and/or enter into transactions that reference interest rates benchmarks that are subject to reform or cessation may be exposed to potential risks. These risks include, but are not limited to, the following:

    • The existing agreements may not fully cater for a scenario where the LIBOR benchmark permanently ceases or is no longer representative, including that the agreement may not have any express fallbacks or have fallbacks that are not effective
    • The fallback interest rate calculation provisions of the relevant agreement may become operative, which may impact the expected performance of the transaction or product
    • Some changes to contractual documentation may be required. This may include changes relating to the calculation of interest and other payments, which may impact the amount counterparties pay or receive and/or other terms of the relevant agreement that reference LIBOR
    • Mismatches (including economic mismatches) may occur if the fallback wording for linked transactions differ: this could be in respect of the underlying reference rate the transactions fall back to and/or the timing of when fall back wording becomes operative. For example, an interest rate swap (hedge) may have different fallbacks to a loan (underlying transaction)
    • Methodologies for determining an alternative reference rate and/or calculating a potential credit adjustment spread (which may be necessary for the transition to be as economically neutral as possible) may vary across different types of products and jurisdictions
    • It may be necessary to implement new operational processes or systems and/or amend existing ones to support alternative reference rates
    • The value of products may change or products may no longer serve the purposes or function as originally intended. For example, as liquidity in LIBOR falls due to to a decrease in the number of LIBOR-referencing underlying transactions, LIBOR and LIBOR-referencing products and transactions may become more volatile
    • Alternative reference rates may be materially different from LIBOR interest rate benchmarks which could result in unexpected changes in the performance of the underlying products or transactions
    • Barclays may have rights to exercise discretion to determine a replacement rate for interest rate benchmarks linked to a transaction or product
    • Interest rate benchmark reform may also result in a variety of tax, accounting and regulatory implications
    • Barclays may, in accordance with the relevant rules or methodology of a Barclays index or other quantitative investment strategy, have rights to determine a replacement rate for interest rate benchmarks that feature as a component of such index or strategy and to make any necessary modifications to the methodology as a consequence. The use of a replacement rate and related adjustments may affect the performance of the index or strategy.
    • Products linked to or referencing a Barclays proprietary index or strategy in which LIBOR represents a substantive component or signal may be significantly affected if no appropriate substitute benchmarks are available

    Market participants are encouraged to evaluate their individual circumstances and review their LIBOR-linked exposures. Except where we otherwise agree with you in writing, Barclays does not provide advice, or recommendations on the suitability of your product choice or financial solution. We encourage all market participants to develop a sufficient understanding of the latest developments in LIBOR reform, any exposure they may have to LIBOR benchmarks, along with any expected and potential changes as a result of LIBOR transition and how these changes may impact them and/or their organisation, using independent professional advisors (legal, accounting, financial, tax or other) as appropriate.

    Should you require further information on LIBOR transition, the other areas of the website contain a number of resources including FAQs and useful external links.

    Intermediaries and Distributors can click here (PDF 89KB) for information on the impact of RFRs on Floating Rate Note (FRN) coupon interest rate payments.

    If you wish to discuss any of the risks associated with LIBOR Transition in more detail, please reach out to your Barclays point of contact.

  • What is Barclays doing to prepare for LIBOR Transition
    • Barclays continues to support the benchmark interest rate reform agenda as set out by the Financial Stability Board in 2014 and subsequently driven by the international risk free rate working groups and relevant supervisory authorities.  We are actively engaged in the reform agenda and along with participating in various industry conferences and events discussing LIBOR transition, Barclays is a member of the US, EU, Japan and Singapore working groups. More prominently, Barclays chairs the Working Group on Sterling Risk-Free References Rates.
    • As instructed by the Bank of England Prudential Regulatory Authority and the UK Financial Conduct Authority, Barclays planned for the base case scenario that LIBOR will no longer be available after 2021.
    • Barclays has mobilised an enterprise-wide programme with Senior Manager oversight, to coordinate its global efforts in relation to the transition.
    • Barclays is also aware that transition to RFRs is at different stages depending on the jurisdiction, and moving at different speeds. This also applies to the potential development of RFR-based term rates. 
    • Barclays expects that the timing of any transition away from relevant interbank offered rates to take into account liquidity in the replacement RFR, the potential development of robust RFR-based term rates, development of any relevant industry conventions and the speed with which participants in the various derivative, bond and lending markets transition away from LIBOR.

    Corporate and Investment Bank Clients

    We have previously sent communications to clients of the Corporate and Investment Bank, in order to highlight some of the risks market participants should consider and suggest what steps could be taken to prepare for LIBOR cessation, and have also ensured that clients with facilities yet to transition are aware of the processes and rationale behind Tough Legacy and Synthetic LIBOR.

    For more information on Corporate Banking Products please visit our website.

    Private Bank Clients

    We have previously sent communications to clients of the Private Bank in order to highlight some of the risks market participants should consider and suggest what steps could be taken to prepare for LIBOR cessation.

  • What should market participants do to prepare

    Given the use of LIBOR in relation to many financial products, any potential cessation of publication could have a financial and operational impact. It is therefore important that market participants seek to understand how this affects them and that this may now differ depending on which LIBOR setting applies. This may be achieved by taking some initial steps, including (though not necessarily limited to):

    For non-USD LIBOR products

    • Identify which products they use that reference LIBOR;
    • Confirm which of these products may have already been transitioned to an alternative rate.
    • Confirm which have been transitioned to an interim rate, mainly synthetic LIBOR, and whether they now require additional action.

    For USD LIBOR products

    • Identify which products they use that reference LIBOR;
    • Identify what amount of exposure these products have to LIBOR, including which mature after the end of June 2023;
    • Examine and, if necessary, amend existing products to ensure there is robust language in place that sets out the steps to be taken, or the interest rate to be applied, in case LIBOR is no longer available (note the process for amending a particular financial product will depend on its terms and may require a consent process);
    • Ensure appropriate documentation is in place to adequately disclose or mitigate risks associated with the discontinuation of LIBOR;
    • For new products, confirm that they align with guidance on the use of USD LIBOR post 31 December 2021.
    • Produce an inventory of relevant systems used (e.g. trade booking, risk systems) that may be affected should LIBOR no longer be published in the future, and consider making changes that will allow those systems to use alternative rates.

    We encourage Market Participants to stay up-to-date on the latest developments and to consider how these changes may impact their organisation and the products in which they transact, using independent professional advisors (legal, accounting, financial, tax or other) as appropriate.

    This is not intended to be an exhaustive list but instead, some initial steps market participants may want to consider as a starting point. Further information is available from the PRA/ FCA’s Dear CEO letter sent to supervised entities in March 2021, which set out that all firms meet the milestones of the Working Group on Sterling Risk-Free Reference Rates and the targets of other working groups and relevant supervisory authorities, as appropriate.

Frequently asked questions (FAQs)

These FAQs explore the background to this journey and discuss the new rates in greater detail.


This information:

(i) Has been prepared by Barclays Bank PLC and its affiliates (“Barclays”) and is provided for information purposes only and is subject to change. It is indicative only and not binding. 

(ii) Is not research nor a product of the Barclays Research department. Any views expressed in this communication may differ from those of the Barclays Research department. All opinions and estimates are given as of the date of this communication and are subject to change. Barclays is not obliged to inform recipients of this communication of any change to such opinions or estimates.

(iii) Is general in nature and does not take into account any specific investment objectives, financial situation or particular needs of any particular person.

(iv) Does not constitute an offer, an invitation or a recommendation to enter into any product or service and does not constitute investment advice, solicitation to buy or sell securities and/or a personal recommendation.  Any entry into any product or service requires Barclays’ subsequent formal agreement which will be subject to internal approvals and execution of binding documents.

(v) Is for the benefit of the recipient. No part of it may be reproduced, distributed or transmitted without the prior written permission of Barclays.

(vi) Has not been reviewed or approved by any regulatory authority.

Barclays is a full service bank. In the normal course of offering products and services, Barclays may act in several capacities and simultaneously, giving rise to potential conflicts of interest which may impact the performance of the products.

Where information in this communication has been obtained from third party sources, we believe those sources to be reliable but we do not guarantee the information’s accuracy and you should note that it may be incomplete or condensed.

Neither Barclays nor any of its directors, officers, employees, representatives or agents, accepts any liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this communication or its contents or reliance on the information contained herein, except to the extent this would be prohibited by law or regulation. Law or regulation in certain countries may restrict the manner of distribution of this communication and the availability of the products and services, and persons who come into possession of this publication are required to inform themselves of and observe such restrictions.

You have sole responsibility for the management of your tax and legal affairs including making any applicable filings and payments and complying with any applicable laws and regulations. We have not and will not provide you with tax or legal advice and recommend that you obtain independent tax and legal advice tailored to your individual circumstances.