IBA survey on the use of LIBOR closes for responses on February 15, 2019
ICE LIBOR (formerly known as BBA LIBOR) is a widely used benchmark for short-term interest rates, providing an indication of the average rates at which LIBOR panel banks could obtain wholesale, unsecured funding for set periods in particular currencies.
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.
It is produced for five currencies (CHF, EUR, GBP, JPY and USD) and seven tenors (Overnight/Spot Next, 1 Week, 1 Month, 2 Months, 3 Months, 6 Months and 12 Months) based on submissions from a reference panel of between 11 and 16 banks for each currency, resulting in the publication of 35 rates every applicable London business day.
Please read IBA’s benchmark and other information notice and disclaimer here.
With input from the LIBOR Oversight Committee, IBA has 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 sets out our framework to evolve LIBOR so that it can continue to provide an indication of the average rates at which LIBOR panel 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 panel banks.
IBA has worked with panel 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 panel 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 intends to transition panel 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 panel banks that are determined through the use of a standardised, transaction data-driven Waterfall Methodology.
The Waterfall Methodology requires LIBOR panel banks to base their submissions in eligible wholesale, unsecured funding transactions to the extent available:
Prior to transitioning to the Waterfall Methodology, LIBOR panel banks base 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 are determined based on data from a range of relevant transaction types. These may also utilise qualitative criteria such as the expert judgement of the submitter. Each LIBOR panel bank must ensure that its submissions are determined using an effective methodology based on objective criteria and relevant market information.
During the transition process, some panel banks will be making LIBOR submissions using the LIBOR submission question while others will be making LIBOR submissions using the Waterfall Methodology. Once the transition is complete, all panel banks will be making LIBOR submissions under the Waterfall Methodology.
The Future of LIBOR
On 4 December 2018, IBA launched a survey on the use of LIBOR. The survey is open to all users of LIBOR and is designed to identify the LIBOR settings that are most widely used. The results of the survey will be used to inform IBA’s work in seeking the support of globally active banks for the publication of certain LIBOR settings after year-end 2021, when the FCA intends that it would no longer be necessary for it to sustain LIBOR through its influence or legal powers.
The primary goal of IBA’s work would be to provide those LIBOR settings to users with outstanding LIBOR-linked contracts that are impossible or impractical to modify. Any such settings would need to be compliant with relevant regulations and in particular those regarding representativeness.
IBA’s work in seeking the support of banks for the publication of certain LIBOR settings after year-end 2021 is also designed to facilitate the industry’s work towards an orderly adoption of alternative ‘risk-free‘ reference rates (RFRs) into the financial system, as called for by the FCA and the central banks. ICE supports this work and IBA has launched the ICE Term RFR Portal and published a paper showing how IBA can support the development of term structures for alternative RFRs.
Work on the possible continued publication of certain LIBOR settings is not intended as an alternative to the transition to RFRs for new business. Regardless of the results of the survey, there is no guarantee that any LIBOR settings will continue to be published after year-end 2021. Users of LIBOR should not rely on the continued publication of any LIBOR settings when developing transition or fall back plans.
Calculation & Publication
LIBOR panel banks’ submissions for each currency and tenor pair are ranked by IBA and the upper and lower quartiles are excluded to remove outliers. The relevant rate is then calculated as the trimmed arithmetic mean of the remaining submissions, rounded to five decimal places. Each LIBOR panel bank's submission carries an equal weight, 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 pair 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 Panel 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
ICE 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.
Policies & Procedures
LIBOR Code of Conduct
LIBOR Oversight Committee
Consultations & Position Papers