IBOR
- IBOR is a term benchmark across multiple tenors
- Contains Interbank credit risk
- Forward looking rate
- Published same day
- Based on expert judgement and transaction data
What are we transitioning to?
When transitioning from LIBOR to ARR (or from other IBORs), there are some things that differ. IBORs are forward looking interest rates which incorporates the banks’ credits risk (published for various terms, including overnight, 1w, 1m, 2m, 3m, 6m, 12m).
In contrast, ARRs are overnight interest rates with little or no credit risk incorporated. ARRs are based on real transactions between market counterparties, whereas IBORs are usually based on contributions from panel banks.
IBORs are normally published around 11 am. CET for the same date. Since ARRs are based on real transactions during the whole day, and there is a more rigorous process to validate the data, they are published on the following day. The exact time differs between currencies.
When using an ARR with an interest period of 1 or 3 months, the most correct way is to use a “backward-looking” rate. This means that the rate is not known in the beginning of the interest period, but only a few days before the interest payment is due.
The IBOR transition is seen as a market driven reform and as such there is an absence of regulatory guidance that could drive the development of market practice as well as ensuring a sync across currencies and products.
IBOR vs ARRs
ARRs
- Overnight rates with no term element
- No Credit risk/ Risk free (or "near" risk free)
- Backward looking rate
- Published the next day
- Based on transaction data
Overview Interest rate benchmarks in selected jurisdictions
Find below selected currencies the risk free rate alternatives and links to the ARR administrators
| Jurisdiction | Currency | IBOR | ARR/RFR ¹ | Admin. of alternative reference rate |
| United Kingdom | GBP | LIBOR² | SONIA | Bank of England |
| USA | USD | LIBOR³ | SOFR | Federal Reserve Bank of New York |
| Switzerland | CHF | LIBOR² | SARON | SIX Swiss Exchange AG |
| Japan | JPY | TIBOR, LIBOR² | TONA | The Bank of Japan |
| European Union | EUR | EURIBOR, LIBOR² | €STR | European Central Bank |
| Sweden | SEK | STIBOR | SWESTR | Swedish Riksbank |
| Norway | NOK | NIBOR | NOWA | Norges Bank |
| Denmark | DKK | CIBOR | DESTR | Danmarks Nationalbank |
1 fallback to IBOR
2 Ceased end of 2021
3 Will cease 30 June 2023
Disclaimer
This page has been compiled by SEB Large Corporates & Financial Institutions, a division within Skandinaviska Enskilda Banken AB (publ) (“SEB”) to provide background information only.
Opinions, projections and estimates contained in this report represent the author’s present opinion and are subject to change without notice. Although information contained in this report has been compiled in good faith from sources believed to be reliable, no representation or warranty, expressed or implied, is made with respect to its correctness, completeness or accuracy of the contents, and the information is not to be relied upon as authoritative. To the extent permitted by law, SEB accepts no liability whatsoever for any direct or consequential loss arising from use of this page or its contents. The analysis and valuations, projections and forecasts contained in this report are based on a number of assumptions and estimates and are subject to contingencies and uncertainties; different assumptions could result in materially different results. The inclusion of any such valuations, projections and forecasts should not be regarded as a representation or warranty by or on behalf of the SEB Group or any person or entity within the SEB Group that such valuations, projections and forecasts or their underlying assumptions and estimates will be met or realised.