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IBOR Reforms

Interest rate benchmarks including the London Interbank Offered Rate (LIBOR), the Euro Interbank Offered Rate (EURIBOR), the Euro Overnight Index Average (EONIA) and some other Interbank Offered Rates (IBORs) are being replaced or reformed.

Overview

Interest rate benchmarks including the London Interbank Offered Rate (LIBOR), the Euro Interbank Offered Rate (EURIBOR), the Euro Overnight Index Average (EONIA) and some other Interbank Offered Rates (IBORs) are being replaced or reformed. These changes are expected to cause at least some of these benchmarks to perform differently to the way they do currently or to disappear. This may impact the HSBC products and services you use and those we provide in the future. 

Regulatory authorities alongside public and private sector working groups in several jurisdictions have been discussing the alternatives to IBORs. Their objective has been to consider how best to support the transition to alternative rates and the development of new products referencing them.

The information below provides an overview of the changes as at January 2022 and reflects HSBC’s current understanding and interpretation of the new landscape. It does not constitute any form of advice or recommendation. Our clients should seek guidance from their professional advisors on the possible implications of the changes from a financial, legal, accountancy or tax perspective.

Background

In a wide range of financial products such as derivatives, overdrafts and loans (including mortgages), securitisations and deposits, interest rates can be fixed or alternatively calculated by reference to benchmark rates. IBORs have been interest rate benchmarks used commonly in the financial markets globally. 

LIBOR, probably the most widely used benchmark, has been published in a number of currencies and used in financial products denominated in GBP (British Pound), USD (US Dollar), EUR (Euro), JPY (Japanese Yen) and CHF (Swiss Franc). 

There are also other interest rate benchmarks based on Interbank Offered Rates, such as:

  • Tokyo Interbank Offered Rate (TIBOR) - the Japanese Yen interest rate benchmark published in Tokyo, 
  • EURIBOR - the Euro interest rate benchmark published in the Euro area,
  • Hong Kong Interbank Offered Rate (HIBOR) - the interest rate benchmark for Hong Kong Dollar,
  • Singapore Interbank Offered Rate (SIBOR) - the interest rate benchmark for Singapore Dollar.

Financial regulatory authorities have expressed their concern that the interbank lending market, which IBORs are intended to reflect, is no longer sufficiently active or liquid. This has resulted in an effort to encourage financial markets to move away from the use of IBORs to alternative reference rates, e.g. near risk-free rates (RFRs), or change the way that IBORs are determined. Some IBORs are transitioning to new or amended benchmarks (e.g. LIBOR) or have been reformed and are not expected to cease in the near term (e.g. EURIBOR).

Frequently Asked Questions

For more information

We will periodically update this site and/or provide communications relating to the changes. In the meantime, if you require any further information, please contact your Relationship Manager.

If you would like more general information on interest rate reform and IBOR transition, the Financial Conduct Authority (FCA), the Bank of England, the U.S. Commodity Futures and Trading Commission (CFTC), the Federal Reserve Bank of New York (FRBNY), the U.S. Alternative Reference Rates Committee (ARRC), the European Central Bank (ECB), the Financial Stability Board (FSB), the International Organization of Securities Commissions (IOSCO) and some of the working groups and industry bodies that are considering these issues have published information which can be found on their websites.

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