LIBOR–the London Interbank Offered Rate–is the most widely used interest rate benchmark to price or value a wide range of financial products, including corporate and personal loans, mortgages, bonds, securitizations and derivatives, underlying over $370 trillion of transactions across the globe.
In 2014, following developments in the global markets that revealed weaknesses in LIBOR’s sustainability as a reference rate, the U.S. Federal Reserve commissioned the Alternative Reference Rate Committee (ARRC) to recommend a benchmark interest rate that would replace USD LIBOR, or the short-term reference rate for dollar-denominated debt. In 2017, the ARRC selected SOFR as its preferred alternative to US LIBOR, representing best practice for use in certain new USD derivatives and other financial contracts. In a speech on July 27, 2017, Andrew Bailey, chief executive of the UK's Financial Conduct Authority (FCA), announced that market participants should not rely on LIBOR being available after 2021. The transition process from LIBOR to SOFR is continuously evolving and represents a significant change that will impact all participants in financial and capital markets globally. Most recently, the ICE Benchmark Administration (IBA) proposed certain changes to the timing of LIBOR’s cessation, effectively extending the final deadline for cessation of LIBOR until June 30, 2023.
IFC has conducted a comprehensive analysis of the impact of the transition from a lending, funding, accounting, operations, information technology and legal perspective, on IFC’s portfolio of existing loans and capital mobilization programs.
IFC is monitoring market developments and working toward a smooth transition to a successor benchmark rate. IFC is collaborating with partners in the financial industry—particularly with Multilateral Development Banks and other Development Finance Institutions—to track industry developments and develop best practices, including fallback language for bilateral and multilateral transactions.
If you have any questions, please contact IFC at email@example.com.
For information on market guidance and the transition process, please visit these websites:
For U.S. dollar markets, efforts toward determining an alternative benchmark rate are being led by the Alternative Reference Rates Committee, which includes private market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York.
The transition in the derivatives market is being led by the International Swaps and Derivatives Association, which the Financial Stability Board tasked to remediate the relevant provisions in the derivatives contacts.
Last Updated: January 07, 2021