Preparing for the reference rate change

Preparing for the reference rate change


After the Financial Crisis, InterBank Offered Rates (IBORs) have been declared unreliable by Regulators and new Alternative Reference Rates transactions-based have been developed to substitute these indices. Consequently, most of the IBORs will cease to be published from December 2021. As IBORs are used in a broad range of financial products and contracts, market participants need to be prepared and work on a plan to move away from them.

Key takeaways

  • Most of InterBank Offered Rates (IBORs) are going be discontinued from December 2021
  • New Alternative Reference Rates (ARR) have been identified and developed to substitute IBORs
  • Regulators are publishing guidelines to encourage and support the private market participant in the change.

What are IBORs?

IBORs stands for InterBank Offered Rates and includes indices as Euro OverNight Index Average (EONIA), EURO InterBank Offered Rate (EURIBOR) and London Interbank Offered Rate (LIBOR). These indices have set the benchmark rate for lending on an unsecured basis, underpinning the worldwide trade in financial products – from bonds and loans to derivatives and mortgage-backed securities.

Why are IBORs not reliable anymore?

In 2012, some banks have been accused of fraudulent activities and data manipulation during the financial crisis. As consequence, the integrity of IBORs was questioned by Regulators and National authorities who express the need of rates based on actual transactions and not anymore on bank quotes. In 2017 the UK Financial Conduct Authority (FCA) announced that LIBOR rate would have been discontinued at the end of 2021. Other IBORs will cease to be published from that date (i.e. EONIA) whereas others have been reformed (i.e. EURIBOR) and will continue to exist even after.

What is going to happen?

Several working groups at national and international levels have been established to work on the definition of Alternative Reference Rates (ARR) for the relevant currencies and to develop best practice and roadmap on the transition for market players.


IBOR Reference Rate

Alternative Reference Rate



SOFR (Secured Overnight Financing Rate)



EURIBOR (reformed)



€STR (Euro Short Term Rate)



SARON (Swiss Average Rate Overnight)



SONIA (Sterling Over Night Index Average)



TONA (Tokyo Overnight Average Rate)



HIBOR (reformed) / HONIA (Hong Kong Dollar Overnight Index Average)


The transition away from IBORs to the ARR is impacting globally market participants and financial institutions. Precisely, Legal renegotiation are required for existing contracts as well as repapering and repricing, fallback provision should be included in all the agreements, operational developments are needed to ensure ability to process ARR instruments and a proper client onboarding and communication should be implemented.

How Allianz Global Investors is preparing the transition?

Allianz Global Investors started working on the IBOR discontinuation already beginning of 2019 to assess the impact, to identify the risks, to develop mitigation actions and to ensure a smooth transition from IBOR to the new Alternatives Reference Rates (ARR). In addition, Allianz Global Investors is closely tracking developments, consultations, and publications from all global Working Groups, including their best practice guidelines.



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