Over the past three years, ongoing reforms around the rate-setting process for the London Interbank Offered Rate (LIBOR) have reduced subjective inputs, increased transparency and transformed ICE LIBOR into a robust benchmark with strong governance. As the world’s most experienced administrator of regulated benchmarks, ICE Benchmark Administration is leading the reform efforts to ensure LIBOR continues to evolve in its role as an accurate benchmark for short-term rates to meet the long-term needs of market participants.

Key LIBOR Facts

  • 35 LIBORs calculated every business day
  • Produced for 5 currencies
  • 7 maturities quoted for each currency
  • Maturities range from overnight to 12 months

Market Participants Say LIBOR’s Ongoing Evolution is Crucial

During broad consultations with regulators and over 1,000 market participants, we reached the consensus that the continued evolution of LIBOR is vital to ensure LIBOR retains its integrity and relevance in today’s increasingly complex funding markets and can be relied upon by the market participants who depend on it.

Key Reforms that Ensure LIBOR’s Long-Term Sustainability

By building strong governance around LIBOR, ICE Benchmark Administration has strengthened oversight of the benchmark, taken a market-based approach that minimizes subjectivity, and brought increased transparency and confidence into the rate-setting process with a highly regulated, process-driven methodology.

Critical benchmark reforms include:

  • Establishment of the independent LIBOR Oversight Committee, which oversees the benchmark’s code of conduct while evolving it to reflect changing market conditions. This committee is made up of a wide range of market participants, including submitting banks, infrastructure providers, industry bodies and regulators.
  • We built a bespoke surveillance system that runs over 4.5 million daily calculations to identify anomalies, drive transparency and ensure accuracy in the rate-setting process.
  • Implementation of an automated process that provides real-time validation checks on submissions to prevent errors and protect data integrity at each stage of the process before the rate is calculated.
  • Ongoing new technology development is underway for the collection of submissions and related transaction data to continue to evolve LIBOR.

ICE LIBOR is the primary benchmark for short-term interest rates globally.

The Future of LIBOR: Moving Toward a Transaction-Based Benchmark

Basing LIBOR on transactions as much as possible was the strategic direction set by the Financial Stability Board in 2014, and endorsed by regulators and central banks around the globe.

Toward that end, we’ve developed a standardised methodology, known as the waterfall, for formulating LIBOR submissions and plan to gradually transition submitting banks to the waterfall methodology as outlined in our reform roadmap.

This methodology is designed to ensure that panel banks use transactions from a wide pool of funding sources where available, and ensure panel banks can always make a submission based on objective data regardless of transaction activity on a particular day, minimizing the use of subjective judgement.

As we continue our LIBOR efforts, our focus is on ensuring the benchmark remains sustainable for the future and evolves to meet the dynamic needs of the global marketplace.