postLIBOR

The term postLIBOR refers to the period following the phase-out of the London Interbank Offered Rate (LIBOR). LIBOR was a benchmark interest rate that was widely used globally as a reference for various financial products. Due to concerns about its reliability and susceptibility to manipulation, regulators decided to discontinue its use.

The transition away from LIBOR has involved the development and adoption of alternative reference rates (ARRs). These ARRs are typically based on actual transaction data rather than expert judgment, making them more robust. Examples of ARRs include the Secured Overnight Financing Rate (SOFR) in the United States, the Sterling Overnight Index Average (SONIA) in the UK, and the Euro Short-Term Rate (€STR) in the Eurozone.

Financial institutions and market participants have been working for several years to prepare for the cessation of LIBOR. This has included repapering contracts, updating systems, and educating stakeholders. The move to ARRs aims to ensure the continued smooth functioning of financial markets and maintain the integrity of financial benchmarks.

The postLIBOR era signifies a fundamental shift in how interest rates are determined and referenced in financial contracts. While the transition has presented challenges, it is seen as a crucial step towards a more stable and transparent financial system. Ongoing efforts continue to ensure a complete and orderly transition to these new benchmark rates.