InterBank Offered Rates (IBORs) are reference rates based on the rates that banks use when they lend to each other. Reference rates act as benchmarks in the pricing of financial contracts and products and play an essential role in a well-functioning financial market. In the coming years, IBORs are being phased out and replaced with risk-free reference rates (RFRs).

What the risk-free rates all have in common is that they are based on actual transactions and are retrospective. In addition, they lack maturities, so they have no credit risk. Taken together, these characteristics make RFRs more credible than IBORs.

Following the global financial crisis of 2007-2009, a number of deficiencies related to IBORs were identified. Specifically, the rates were based on professional assessments by the participating banks rather than on actual transactions, and the underlying transaction data was at times deficient. The use of IBORs also entailed a risk that the rate-setting process could be manipulated. Accordingly, the credibility of IBORs declined during this period. As a result, government authorities tightened their requirements for internal controls. In addition, legal penalties related to IBORs increased, and banks consequently became less willing to take responsibility for IBORs.

Demand for risk-free reference rates began to increase – from market players in general, but particularly from the derivatives market. A reform of the price-setting process was seen as imperative, and efforts to develop alternatives to IBORs were launched. An international overview of the reference rates led to the development of alternative risk-free reference rates.

The reference-rate reform is driven by the market, which means that the transition is taking place at a different pace in different countries and that the new risk-free reference rates may be defined in various ways.

Libor rates (GBP, USD, CHF, EUR, JPY) ceased to exist on 31 December 2021 (except for 1m, 3m, 6m and 12m USD Libor, which ended in June 2023). EONIA ceased to exist on 3 January 2022.

Other IBORs such as EURIBOR, STIBOR, NIBOR and CIBOR continue to be published, and for these reference rates there is currently no decision on cessation. However, the new risk-free reference rates in the above currencies are being published and can be used in parallel with existing IBORs.

It’s important to be aware that the phasing out of IBORs may have a financial as well as an operational impact on an organisation. That’s why we at Swedbank recommend that you, as our customer, gain an understanding of whether and how the transition could affect you or your operations. We recommend that you identify:

• whether you have any exposures to IBORs
• which reference rates will be used, according to the agreement in place, when the IBOR is no longer applicable

When buying new financial products, one of the existing risk-free rates is to be used. If any of the products use IBORs that have not yet ceased, it is a good idea to identify which rate will be used when the IBOR ceases to exist.

Swedbank, as a major full-service bank, has been using IBORs in our lending, savings and investment products, as well as in our internal processes.

We are working continuously to identify, coordinate and follow up on relevant activities to ensure that our customers experience a smooth transition from IBORs to alternative rates.

The bank has adapted to the new reference rates in relevant financial products and parts of our operations, and will facilitate the use of new risk-free rates when they are made available.

Communication with affected customers is taking place continuously. If you have any questions about the transition, you are very welcome to contact your Client Executive.