ICE LIBOR™ (also known as LIBOR™) is a widely-used benchmark for short-term interest rates.
The LIBOR methodology is designed to produce an average rate that is representative of the rates at which large, leading internationally active banks with access to the wholesale, unsecured funding market could fund themselves in such market in particular currencies for certain tenors.
LIBOR is currently calculated for five currencies (USD, GBP, EUR, CHF and JPY) and for seven tenors in respect of each currency (Overnight/Spot Next, One Week, One Month, Two Months, Three Months, Six Months and 12 Months). This results in the publication of 35 individual rates (one for each currency and tenor combination) every applicable London business day.
Used globally, LIBOR is often referenced in derivative, bond and loan documentation, and in a range of consumer lending instruments such as mortgages and student loans. It is also used as a gauge of market expectation regarding central bank interest rates, liquidity premiums in the money markets and, during periods of stress, as an indicator of the health of the banking system.
Please read IBA’s benchmark and other information notice and disclaimer here.
With input from the LIBOR Oversight Committee, IBA consulted widely with stakeholders from around the world on the evolution of LIBOR. This resulted in the publication of the Roadmap for ICE LIBOR in March 2016.
Guided by the recommendations and principles in the Wheatley Review of LIBOR, the IOSCO Principles for Financial Benchmarks and the Financial Stability Board’s report on Reforming Major Interest Rate Benchmarks, the Roadmap set out our framework to evolve LIBOR so that it could continue to provide an indication of the average rates at which LIBOR panel banks (Contributor Banks) can obtain wholesale, unsecured funding. As part of this framework, the Roadmap included the ICE LIBOR Output Statement (which was updated pursuant to a further consultation), which set out a single LIBOR definition and a standardised “Waterfall Methodology” for the submission of rates by Contributor Banks.
IBA worked with Contributor Banks to develop the infrastructure and systems necessary to make LIBOR™ submissions using the Waterfall Methodology. Between September 15 and December 15, 2017, all 20 Contributor Banks were required to make test parallel LIBOR submissions using the Waterfall Methodology to the same standard as their current LIBOR™ submissions. The test LIBOR rates calculated by IBA during this time were published on March 17, 2018, alongside previously published LIBOR calculated using the existing methodology for the same period. On 25 April 2018, IBA announced in its report on ICE LIBOR’s evolution that it intended to transition Contributor Banks to the Waterfall Methodology on a gradual basis, in order to minimise operational and technology risks.
The ICE LIBOR Output Statement defines LIBOR as:
"A wholesale funding rate anchored in LIBOR panel banks’ unsecured wholesale transactions to the greatest extent possible, with a waterfall to enable a rate to be published in all market circumstances".
Pursuant to the ICE LIBOR Output Statement, LIBOR is based on submissions from Contributor Banks that are determined through the use of a standardised, transaction data-driven Waterfall Methodology.
The Waterfall Methodology requires LIBOR Contributor Banks to base their submissions in eligible wholesale, unsecured funding transactions to the extent available:
Prior to transitioning to the Waterfall Methodology, LIBOR Contributor Banks based their submissions on the following LIBOR Submission Question:
“At what rate could you borrow funds, were you to do so by asking for and then accepting interbank offers in a reasonable market size just prior to 11 am?”
LIBOR submissions in response to the question were determined based on data from a range of relevant transaction types. These could also utilise qualitative criteria such as the expert judgement of the submitter. Each LIBOR Contributor Bank had to ensure that its submissions were determined using an effective methodology based on objective criteria and relevant market information.
During the process of transitioning to the Waterfall Methodology, some Contributor Banks were making LIBOR submissions using the LIBOR submission question while others were making LIBOR submissions using the Waterfall Methodology. Following the successful completion of the transition, announced on April 1, 2019, all Contributor Banks will be making LIBOR submissions under the Waterfall Methodology.
The Future of LIBOR
In July 2017, the former Chief Executive Officer of the UK Financial Conduct Authority (the FCA), Andrew Bailey, gave a speech in which he stated the FCA’s intention that it would no longer be necessary for the FCA to “persuade, or compel, banks to submit to LIBOR” after end-2021. The FCA and other official sector bodies have made several announcements since 2017 regarding the need to transition from LIBOR to alternative rates, and market participants have been strongly advised of the need to ensure they are prepared for this transition by the end of 2021.
To facilitate the industry’s progress towards an orderly adoption of alternative rates into the financial system, IBA has launched the ICE Term RFR Portal and published a paper showing how IBA can support the development of term structures for alternative rates.
IBA has also engaged with LIBOR contributor banks, other global banks and end-users of LIBOR regarding LIBOR transition, and the potential for the continued publication of certain widely-used LIBOR settings after end-2021, if necessary to provide a ‘safety-net’ for users with outstanding LIBOR-linked contracts that are impossible or impractical to modify (“tough legacy contracts”). This engagement included a LIBOR-usage survey, which was open to all users of LIBOR and was designed to identify the most widely-used LIBOR settings for which users would like to see IBA work with global banks to potentially support publication after end-2021. The survey closed in February 2019, and the results have been published on IBA’s website.
IBA is using the results of the survey and its other outreach work to engage with globally active banks to seek their support to potentially continue to publish certain widely-used LIBOR settings after end-2021, if necessary to provide a safety-net for users with tough legacy contracts. Any such settings will need to be compliant with relevant regulations and in particular those regarding representativeness.
There can be no certainty or guarantee that IBA will be able to obtain such support or publish any LIBOR settings after end-2021. Work on the possible continued publication of certain LIBOR settings is not intended as an alternative to the transition to alternative rates.
Calculation & Publication
Each LIBOR™ calculation is currently based on input data contributed by a panel of between 11 and 16 Contributor Banks for each of the five LIBOR™ currencies. Each Contributor Bank contributes input data for all seven LIBOR tenors in every currency in respect of which it is on a panel.
Each currency panel is composed with reference to the LIBOR Contributor Bank Criteria, which are designed so that the contributed input data is able to produce a rate that is representative of the economic reality.
Each Contributor Bank determines its input data contributions pursuant to the ICE LIBOR Output Statement in order to produce a rate that is anchored in Contributor Banks’ wholesale, unsecured funding transactions to the greatest extent possible, with a waterfall to enable a rate to be published in all market circumstances.
LIBOR is calculated in accordance with the LIBOR Methodology. The published rate in respect of each currency and tenor combination is the arithmetic mean of each Contributor Bank’s contributions in respect of that currency and tenor (after trimming upper and lower values), rounded to five decimal places. Each Contributor Bank's contribution carries an equal weight in the calculation, subject to the trimming.
Details are shown in the table below:
|NUMBER OF CONTRIBUTORS||METHODOLOGY||NUMBER OF CONTRIBUTOR RATES AVERAGED|
|16 Contributors||4 highest and 4 lowest rates||8|
|15 Contributors||4 highest and 4 lowest rates||7|
|14 Contributors||3 highest and 3 lowest rates||8|
|13 Contributors||3 highest and 3 lowest rates||7|
|12 Contributors||3 highest and 3 lowest rates||6|
|11 Contributors||3 highest and 3 lowest rates||5|
If IBA receives fewer than the expected number of submissions in respect of a particular currency, the ICE LIBOR Reduced Submissions Policy will apply to those rates.
LIBOR is normally published for each currency and tenor combination at 11:55 am London time on each applicable London business day.
|Bank of America N.A. (London Branch)|
|Barclays Bank plc|
|BNP Paribas SA (London Branch)|
|Citibank N.A. (London Branch)|
|Cooperatieve Rabobank U.A.|
|Crédit Agricole Corporate & Investment Bank|
|Credit Suisse AG (London Branch)|
|Deutsche Bank AG (London Branch)|
|HSBC Bank plc|
|JPMorgan Chase Bank, N.A. (London Branch)|
|Lloyds Bank plc|
|Mizuho Bank, Ltd.|
|MUFG Bank, Ltd|
|National Westminster Bank plc|
|Royal Bank of Canada|
|Santander UK Plc|
|Société Générale (London Branch)|
|Sumitomo Mitsui Banking Corporation Europe Limited|
|The Norinchukin Bank|
Governance & Oversight
IBA maintains an oversight committee for LIBOR, which has responsibility for:
The committee has broad market representation, being comprised of Contributor Banks, benchmark users, market infrastructure providers, independent non-executive directors of IBA, and other relevant experts. Representatives from the Board of Governors of the Federal Reserve System, the Swiss National Bank and the Bank of England also sit on the committee as observers.
Oversight Committee Meeting Public Minutes
LIBOR is published on each London business day for all currencies and tenors, except as described below.
There is no LIBOR publication in any currency or tenor if the date is a public holiday in London.
Where a valid publication day is a public holiday in the major financial centre of a currency, there is no publication in the Overnight tenor only, for that currency. All other tenors are published as normal. This rule concerns only the Euro and US Dollar, since Yen and Swiss Franc do not have an Overnight tenor.
The following tables set out the relevant holidays for the different currencies and tenors. Specific dates for each year are available on the Holiday Calendars page. The Holiday Calendars also list the designated Value Dates, by currency and tenor, for each benchmark date.
London Public Holidays
Applies to all LIBOR currencies and tenors;
Euro Public Holidays (Affects Euro Overnight tenor only)
All other relevant Euro public holidays are also London public holidays, so LIBOR is not published on these days.
U.S. Dollar Public Holidays (Affects US Dollar Overnight tenor only)
All other relevant U.S. public holidays are also London public holidays, so LIBOR is not published on these days.
LIBOR Code of Conduct
LIBOR Output Statement
LIBOR Oversight Committee
Assurance on Compliance with EU Benchmarks Regulation and Benchmark Methodologies
Consultations & Position Papers