• Whitepaper
  • Financial Industry
  • Interbank Offered Rates
  • CRISIL Global Research and Risk Solutions
  • Model Risk
July 26, 2022

Navigating the IBOR transition challenges

The interbank offered rates (IBORs) have been the most popular benchmarks in the financial industry for more than three decades. At its peak, the IBORs served as a reference rate for loans and derivatives contracts worth over $350 trillion.

 

During the financial crisis of 2008, regulators discovered irregularities in the IBORs, which prompted them to look for a robust and transparent alternative reference rate (ARR). The identified new reference rates are structurally different from the IBORs, which makes the transition challenging.

 

This whitepaper presents a short history of the London interbank offered rate (LIBOR), along with its challenges and details of the ARRs. It highlights the valuation-related hurdles and how the market is navigating them with the new reference rates. The paper also showcases how CRISIL has been helping market participants in their IBOR transition and what it can do to help them sail smoothly.