Understanding IBOR Benchmark Fallbacks
Benchmark Reform and Transition from LIBOR
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Key interbank offered rates (IBORs), types of interest rate benchmarks, have undergone a period of change in recent years as regulators and industry groups have recommended firms adopt alternative, overnight risk-free rates (RFRs).
On October 23, 2020, ISDA launched the IBOR Fallbacks Supplement (Supplement 70 to the 2006 ISDA Definitions) and IBOR Fallbacks Protocol. The Supplement amends ISDA’s standard definitions for interest rate derivatives to incorporate robust fallbacks published by Bloomberg for derivatives linked to certain IBORs. These changes came into effect on January 25, 2021. Transactions incorporating the 2006 ISDA Definitions entered into on or after January 25, 2021 include the amended floating rate options (i.e., the floating rate options for the relevant IBORs with the fallbacks).
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In the case of the London Interbank Offered Rate (LIBOR), it was clear that market participants could not rely on this rate being available after the end of 2021. In March of 2021, the UK’s Financial Conduct Authority (FCA) – LIBOR’s regulator – gave firms a clear timetable for when they needed to shift to alternative reference rates. Since then, the derivatives industry had clarity on exactly when new fallbacks for outstanding LIBOR exposures would kick in for all 35 currency and tenor pairs pursuant to the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, as well as the spread adjustments that would be added to the adjusted RFRs in the fallback methodology.
Following a consultation by ICE Benchmark Administration (IBA), the administrator of LIBOR, the FCA confirmed that the majority of tenors in all currencies – including all tenors of the euro, Swiss franc, sterling, and yen, and the one-week and two-month US dollar LIBOR would permanently cease immediately after December 31, 2021. Publication of the overnight and 12-month US dollar LIBOR settings ceased immediately after June 30, 2023.
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However, synthetic versions of LIBOR continued to be published beyond the cessation of certain IBORS and tenors. In September 2021, after consultation with market participants, the FCA announced that it would require IBA to continue to publish synthetic sterling, yen, and USD LIBOR for differing periods. The one-month, three-month, and six-month synthetic yen LIBOR were published for the final time on December 31, 2022, while the one-month and six-month synthetic sterling LIBOR were published for the final time on March 31, 2023. The three-month synthetic sterling LIBOR is expected to cease on March 31, 2024.
In April 2023, the FCA announced that it decided to require IBA also to continue publishing one-month, three-month, and six-month USD LIBOR on a synthetic basis for legacy contracts until September 30, 2024. The FCA also stressed that the use of synthetic LIBOR by UK-regulated firms will not be permitted for new trades, while use by regulated firms in legacy transactions will be subject to permission from the FCA under its proposed new powers.
Transitioning to the RFRs has been a demanding and complex process for the industry, as RFRs are structurally different from IBORs. They are overnight rates and exhibit different liquidity characteristics and supply/demand issues compared to IBORs.
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ISDA 2020 IBOR Fallbacks Protocol: Adoption Rates
Global Representation Map
Global Representation Table
Adherence Types
Data sourced from ISDA's List of Adhering Parties as of January 17th, 2024.
Adhering parties are individual or agent market participants who use the new fallback rates in place of discontinued IBORs in relevant agreements.
For more information about adhering parties, please visit the ISDA 2020 IBOR Fallbacks Protocol (IBOR Fallbacks Protocol) FAQs
Africa
34
Egypt
6
Kenya
1
Mauritius
5
Morocco
3
Nigeria
3
South Africa
16
Asia
1,522
Bahrain
11
Brunei Darussalam
3
Cambodia
3
China
82
Georgia
8
Hong Kong
181
Indonesia
35
Japan
180
Malaysia
36
Qatar
16
Oman
12
Lebanon
3
Kuwait
6
Maldives
2
Philippines
14
Republic of Korea
57
Thailand
204
Vietnam
7
Taiwan
41
Singapore
298
United Arab Emirates
29
Israel
40
Saudi Arabia
18
India
238
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Europe
2,089
Andorra
2
Austria
26
Belgium
26
Bosnia-Herzgovina
2
Bulgaria
3
Croatia
5
Cyprus
10
Czech Republic
25
Denmark
52
Isle of Man
4
Poland
17
United Kingdom
795
Estonia
2
Italy
55
Portugal
12
British Virgin Islands
2
Finland
33
Jersey
18
Romania
5
Greece
9
Ireland
117
Hungary
10
Gibraltar
1
Germany
56
Guernsey
6
Iceland
8
France
159
Luxembourg
124
Slovenia
5
Monaco
3
Sweden
55
Norway
41
Turkey
30
Lithuania
3
Slovakia
4
Liechtenstein
3
Serbia
1
Malta
4
Spain
27
Netherlands
120
Switzerland
191
Latvia
1
Russia
17
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Bahamas
4
Bermuda
39
Panama
11
Barbados
5
Puerto Rico
8
Canada
182
United States
11,985
Cayman Islands
43
Costa Rica
3
El Salvador
2
Guatemala
2
Honduras
1
Mexico
88
North America
12,373
Argentina
2
Brazil
33
Chile
9
Colombia
25
Peru
8
Uruguay
4
South America
80
Oceania
121
Australia
106
New Zealand
18
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IBOR Fallback Rates
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12M
Spreads
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6M
12M
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JPY
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1W
1M
2M
3M
6M
12M
Spreads
CHF
ON
1W
1M
2M
3M
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12M
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GBP
ON
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*Due to the large amount of data, you may need to double-click one of the buttons below to load the chart
Data sourced from Bloomberg’s LIBOR Transition website and reconciled against data from the Bloomberg Terminal as provided by Bloomberg L.P.
LIBOR data reflect UK holidays. LIBOR: London Interbank Offered Rate. Fallback: Fallback or replacement rate for derivative contracts referencing LIBOR rates as published by Bloomberg is calculated as the sum of an adjusted reference rate plus a spread adjustment by tenor; the spread adjustments were fixed as of March 5, 2021 following the FCA announcement about LIBOR discontinuation. Prior to March 5, 2021, the chart reflects the indicative (variable) spread adjustment as published contemporaneously by Bloomberg. Adjusted Reference Rate: Overnight rate, compounded in arrears, as adjusted for tenor.
For more details about the fallback rates, please visit the site on a desktop.
The data in these charts are historical and were last updated on January 4, 2024. They may continue to be used as a reference point for various LIBOR tenors.
IBOR Fallback Rates: Market Participants Weigh In
A team of consultants from The Brattle Group worked with ISDA and its counsel to prepare a series of reports following associated ISDA consultations of IBOR benchmark fallback rates. In each of these reports, Brattle consultants analyzed, discussed, and summarized the responses of market participants on an anonymized basis to questions raised in the consultations.
Bloomberg/ISDA IBOR Fallback Rate Adjustments Rule Book
2020 Pre-Cessation Consultation
Euro Consultation
Final Parameters Consultation
2019 Pre-Cessation Consultation for LIBOR & Other IBORs
ISDA Supplemental Consultation on Spread & Term Adjustments
ISDA Consultation on Term Fixings & Spread Adjustment Methodologies
JULY 10, 2020
Report on Bloomberg/ISDA IBOR Fallback Rate Adjustments Rule Book
The April 2020 version of the IBOR Fallback Rate Adjustments Rule Book (“Rule Book”) discussed the implementation of the calculation of Rate Adjustments and resulting Fallback Rates across various IBORS.
*The Bloomberg Rule Book has been amended since Brattle’s report was published in July 2020. See the most up-to-date version of the Rule Book here.
MAY 14, 2020
Summary of Responses to the ISDA 2020 Consultation on How to Implement Pre-Cessation Fallbacks in Derivatives
Brattle summarized the responses to ISDA’s February 24, 2020 consultation, 2020 Consultation on How to Implement Pre-Cessation Fallbacks in Derivatives (2020 Pre-cessation Consultation).
MARCH 5, 2020
Anonymized Summary of Responses to the ISDA Supplemental Consultation on Fallbacks in Derivatives Referencing EUR LIBOR and EURIBOR and Other Less Widely Used IBORs
Brattle summarized the responses to ISDA’s December 18, 2019 consultation, Supplemental Consultation on Spread and Term Adjustments, including Final Parameters thereof, for Fallbacks in Derivatives Referencing EUR LIBOR and EURIBOR, as well as other less widely used IBORs (Euro Consultation).
NOVEMBER 15, 2019
Summary of Responses to the ISDA
Consultation on Final Parameters for
the Spread and Term Adjustments
Brattle summarized the responses to ISDA’s September 18, 2019 consultation, Consultation on Final Parameters for the Spread and Term Adjustments in Derivatives (Final Parameters Consultation).
OCTOBER 21, 2019
Anonymized Narrative Summary of Responses to the ISDA Pre-Cessation Consultation
Prepared following ISDA’s Consultation on Pre-Cessation Issues for LIBOR and Certain Other Interbank Offered Rates (IBORs) published on May 16, 2019.
SEPTEMBER 18, 2019
Summary of Responses to the ISDA Supplemental Consultation on Spread and Term Adjustments
Prepared following ISDA’s Supplemental Consultation on Spread and Term Adjustments for Fallbacks in Derivatives Referencing USD LIBOR, CDOR and HIBOR and Certain Aspects of Fallbacks for Derivatives Referencing SOR published on May 16, 2019.
DECEMBER 20, 2018
Anonymized Narrative Summary of Responses to the ISDA Consultation on Term Fixings and Spread Adjustment Methodologies
Prepared following ISDA’s Consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW published on July 12, 2018.
IBOR Fallback Rates
01 What is a benchmark fallback?
02 Why are changes to fallbacks necessary?
03 What rates have been chosen as fallbacks for the IBORs?
04 What is a fallback adjustment?
05 What is an ISDA protocol?
06 Under what circumstances will the new fallbacks come into effect?
07 How can I adopt the new fallbacks?
08 Where can I find the fallback rates?
09 Can I use fallbacks to transition from
the IBORs?
What is a benchmark fallback?
Benchmark fallbacks are replacement rates that apply to derivatives trades referencing a particular benchmark if the relevant benchmark becomes unavailable while market participants continue to have exposure to that rate. In 2020, ISDA implemented new robust fallbacks that apply in the event of a permanent cessation of a key interbank offered rate (IBOR).
Why are changes to fallbacks necessary?
Prior fallbacks under the 2006 ISDA Definitions typically required the counterparty acting as the calculation agent to obtain quotes from major dealers in the relevant interdealer market. As IBORs become permanently discontinued, major dealers will likely be unwilling and/or unable to give such quotes. It is also likely that quotes could vary materially across the market.
What rates have been chosen as fallbacks for the IBORs?
It was determined that the fallbacks are adjusted versions of the risk-free rates (RFRs) identified by public-/private-sector working groups in each jurisdiction as alternatives to the IBORs. Examples of these include AONIA (Australian dollar), CORRA (Canadian dollar), €STR (euro), HONIA (Hong Kong dollar), SARON (Swiss franc), SOFR (US dollar), SONIA (sterling), and TONA (yen).
What is a fallback adjustment?
There are inherent structural differences between the IBORs and RFRs. IBORs were available in multiple tenors, while RFRs are overnight rates. The IBORs also incorporated a bank credit risk premium and other factors. Adjustments are therefore needed to the RFRs to ensure contracts originally negotiated to reference an IBOR continue to meet the original objectives of the counterparties to the maximum extent possible once a fallback takes effect.
Following a series of industry consultations on the adjustment methodologies, the RFRs are compounded over the relevant IBOR period, and a spread adjustment is added to the compounded rate. The spread adjustment is based on the median over a five-year period of the historical differences between the IBOR in the relevant tenor and the relevant RFR compounded over each corresponding period.
What is an ISDA protocol?
A protocol is a multilateral contractual amendment mechanism that is used to make standard amendments to ISDA documentation among adhering counterparties. Protocols provide an efficient way of implementing industry standard contractual changes to legacy trades with a large number of counterparties, avoiding the need to bilaterally negotiate the same amendments with each party individually.
Under what circumstances will the new fallbacks come into effect?
The adjusted RFR in the relevant currency applies as a fallback following the permanent cessation of the IBOR in that currency. For derivatives that reference LIBOR only, the adjusted RFR in the relevant currency also applies as a fallback following the determination by the FCA that LIBOR in that currency is no longer representative of its underlying market, even if it continues to be published (as certain LIBORs were published on a synthetic basis).
How can I adopt the new fallbacks?
ISDA published a supplement amending the 2006 ISDA Definitions to incorporate the new fallbacks. These changes are automatically applied to cleared and non-cleared derivatives referencing the 2006 ISDA Definitions that have been executed on or after the date the supplement came into effect (January 25, 2021). A protocol was also published that enables market participants to choose to incorporate the revisions into their legacy non-cleared derivatives trades with counterparties that also opt to adhere to the protocol. Parties can also agree to incorporate the new fallbacks by bilaterally amending their legacy non-cleared contracts.
Clearinghouses have implemented the fallbacks in all of their legacy cleared derivatives transactions as of the effective date of the updates.
Where can I find the fallback rates?
Bloomberg publishes the adjustments and all-in fallback rates via a variety of distribution platforms. As a result, counterparties are able to access the fallback rates on a screen in the same way they accessed the IBORs prior to their cessation, although the fallback rates are available at the end of each period instead of the beginning.
Can I use fallbacks to transition from the IBORs?
Fallbacks are not intended to be a primary means of moving from IBORs to RFRs. It is recommended that market participants focus on voluntary transition before the cessation of any key IBOR. Moving away from key IBORs voluntarily by amending or closing out contracts that reference those rates allows counterparties to tailor their strategies to their specific portfolios and could allow firms to negotiate terms that avoid the adjustment mechanisms for fallbacks.
Interbank offered Rate (IBOR)
IBOR administrator
Alternative risk-free rate (Rfr)
Alternative rfr administrator
Public-/Private-sector working group
non-ibor currency
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Philippine Peso
Interbank offered Rate (IBOR)
IBOR administrator
Alternative risk-free rate (Rfr)
Alternative rfr administrator
Public-/Private-sector working group
non-ibor currency
Interbank offered Rate (IBOR)
IBOR administrator
Alternative risk-free rate (Rfr)
Alternative rfr administrator
Public-/Private-sector working group
ibor currency
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For more details about the different IBOR currencies, please visit the site on a desktop.
For additional information on benchmark reform, including the operation of new derivatives fallbacks, visit ISDA’s benchmark reform and transition from LIBOR page on the ISDA website.
If you have any questions or would like additional information in relation to these matters, please email benchmarkreform@isda.org