The U.K. Financial Conduct Authority (FCA), the supervisor of ICE Benchmark Administration (the administrator of LIBOR), announced in July, 2017 that it will no longer compel panel banks to submit rates required to calculate LIBOR after December 31, 2021. While the FCA announcement pertained to LIBOR specifically, an industry-wide response triggered an examination more broadly of other inter-bank offered rates (IBORs).
RBC has established a global program in response to the transition and is committed to supporting the industry transition towards alternative risk-free rates. We encourage you to raise awareness of these reforms within your organization, stay up to date on the latest developments and seek professional advice on the potential impact of these reforms on your organization.
For more information, we invite you to review the additional content of this page as well as to visit the relevant webpage(s) of RBC’s Lines of Business. Please contact your RBC representative or relationship manager for additional information.
IBOR Transition at RBC
- Capital Markets and
Treasury Services (opens to another site)
- Wealth Management Canada (opens to another site)
- Wealth Management International (opens to another site)
- Wealth Management US (opens to another site)
- Personal and Commercial Banking (opens to another site)
- Private Banking (opens to another site)
- City National Bank (opens to another site)
The table below shows the approach taken for IBORs for the principal currencies in which RBC products are denominated:
|Impacted Rate||Reform/discontinuation/non-representativeness||Currency||RFR||Multiple rate approach|
|LIBOR (opens to external site)||
On March 5, 2021, the FCA announced the following1:
||GBP||SONIA (opens to external site)||No|
|CHF||SARON (opens to external site)||No|
|JPY||TONA||Yes, consisting of TONA and JPY TIBOR|
|USD||SOFR (opens to external site)||No|
|EUR||€STR (opens to external site)||No|
|EURIBOR (opens to external site)||Reforms to the methodology underpinning EURIBOR to ensure compliance with regulatory requirements have been implemented.
EURIBOR (as revised) is currently expected to continue2.
|EUR||€STR (opens to external site)||Yes, consisting of EURIBOR and €STR|
|EONIA (opens to external site)||As of October 2, 2019, EONIA methodology has been recalibrated to become the sum of €STR plus a fixed spread of 8.5 basis points.
EONIA is expected to be discontinued on 3 January 20223.
|EUR||€STR (opens to external site)||No|
|BBSW (opens to external site)||The calculation of BBSW has since 21 May 2018 used a reformed VWAP methodology, and it is expected that BBSW (as revised) will continue4.||AUD||RBA (opens to external site)
|Yes, consisting of BBSW and RBA Cash Rate|
|CDOR (opens to external site)||6-month and 12-month CDOR tenors will cease to be calculated and published from May 17, 2021 onwards. It is expected that 1-month, 2-month and 3-month CDOR tenors will continue to be published5.
Changes have been made to enhance the methodology underlying CORRA6.
|CAD||Enhanced CORRA (opens to external site)||Yes, consisting of CDOR and CORRA|
- 1 - https://www.fca.org.uk/publication/documents/future-cessation-loss-representativeness-libor-benchmarks.pdf (PDF)
- 2 - https://www.emmi-benchmarks.eu/assets/files/D0246A-2019-EURIBOR Benchmark Statement_final - FINAL.pdf (PDF)
- 3 - https://www.emmi-benchmarks.eu/euribor-eonia-org/about-eonia.html (opens to external site)
- 4 - https://www.asx.com.au/services/benchmark.htm (opens to external site)
- 5 - https://www.refinitiv.com/content/dam/marketing/en_us/documents/policies/cdor-change-consultation.pdf (PDF)
- 6 - https://www.bankofcanada.ca/wp-content/uploads/2019/07/results-carr-consultation.pdf (PDF)
Regulatory authorities and public and private sector working groups in several jurisdictions have strongly encouraged the identification and use of alternative “risk-free rates” (“RFRs”) to replace (or, in some cases, to be used alongside) certain IBORs. These working groups have also published recommendations which consider how to support a transition to, and the development of new products referencing, these RFRs.
The Bank of Canada has determined that for now, Canada will benefit from the use of both CDOR and enhanced CORRA as a nearly risk-free rate. While utilizing both CDOR and enhanced CORRA is the current position, as the global economies transition towards alternative risk-free rates and as anticipated liquidity in Canada flows towards CORRA and away from CDOR, we would suggest creating an inventory of CDOR-based positions and associated documentation to understand your organization’s exposure to CDOR.
You should also be aware of developments set out below:
On November 12, 2020, Refinitiv Benchmark Services (UK) Limited (“RBSL”), the administrator for CDOR, announced (PDF) the changes below following a public consultation:
From May 17, 2021 onwards, the calculation and publication of 6-month and 12-month CDOR tenors will cease; and
The last day for the publication of 6-month and 12-month CDOR tenors will be May 14, 2021.
The 1-month, 2-month and 3-month CDOR tenors will not be affected by this change.
The Bank of Canada took over the responsibility for the calculation and publication of CORRA on June 15, 2020. The announcement includes a new calculation methodology (opens to another site) for CORRA, sometimes referred to as enhanced CORRA. The rate for a given day will be available on the Bank of Canada CORRA webpage at approximately 09:00 ET on the following business day.
Set out below are some important industry milestones for 2021. This list is not exhaustive, and we encourage you to stay up to date on the transition and raise awareness of it within your organization.
|Jan. 25th, 2021||ISDA IBOR Fallbacks Protocol and IBOR Fallbacks Supplement to the 2006 ISDA Definitions took effect|
|Mar. 5th, 2021||The Financial Conduct Authority (FCA) made an announcement that constitutes an index cessation event under the ISDA IBOR Fallbacks Supplement and 2020 IBOR Fallbacks protocol for all 35 LIBOR settings. As a result, the fallback spread adjustment published by Bloomberg is fixed as of the date of the announcement for all euro, sterling, Swiss franc US dollar and yen LIBOR settings.|
|Mar. 31st, 2021||Working Group for Sterling Risk-Free Reference Rates’ recommendation to cease new issuance of GBP LIBOR referencing loan products, bonds, securitizations and linear derivatives (except for risk management of existing exposure) maturing after 2021|
|May 17th, 2021||CDOR 6-month and 12-month tenors will be discontinued|
|June 30th, 2021||ARRC Best Practices recommendation for cessation of new USD LIBOR loans, non-CLO securitizations and derivative trades maturing after 2021|
|June 30th, 2021||Working Group on Sterling Risk-Free Reference Rates' recommendation to cease initiation of new GBP LIBOR non-linear derivatives that expire after 2021 (except for risk management of existing exposure).|
|Sept. 30th, 2021||ARRC Best Practices recommendation for cessation of new USD LIBOR CLO securitizations maturing after 2021|
|During Q2/Q3, 2021||Working Group on Sterling Risk-Free Reference Rates recommendation to cease initiation of new GBP LIBOR cross currency derivatives (except for risk management of existing exposure)|
|Dec. 31st, 2021||U.S. banking regulators are encouraging banks to cease entry into new USD LIBOR contracts by no later than the end of 2021|
|Dec. 31st, 2021||Last publication date for: all euro LIBOR settings; all Swiss franc LIBOR settings; the spot next, 1-week, 2-month and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings.|
|Dec. 31st, 2021||The fallbacks (ie, to the adjusted risk-free rate plus fixed spread) will automatically occur for outstanding derivatives contracts that incorporate the ISDA IBOR Fallbacks Supplement or are subject to adherence to the ISDA 2020 IBOR Fallbacks Protocol after December 31, 2021 for outstanding derivatives referenced to all euro, sterling, Swiss franc and yen LIBOR settings.|