On 25 June 2018, a group of industry associations (AFME, ICMA, ISDA, SIFMA and SIMFA AMG) published a new report that assesses the issues involved with benchmark reform, and makes recommendations on steps firms can take to prepare for the transition from interbank offered rates (IBORs) to alternative risk-free rates (RFRs).

The report, which is based on a survey of 150 banks, end users, infrastructures and law firms in 24 countries, shows that:

  • there is a gap between high levels of awareness of benchmark reform and concrete steps being taken to transition from the IBORs to alternative RFRs;
  • several key issues are identified as being important for a successful and orderly transition, including the need for market participants to develop new cash products and liquidity in derivatives and futures referencing the RFRs. Corporate and financial end users believe a forward-looking term structure for the RFRs is necessary; and
  • there is an appetite for regular, globally coordinated information from the RFR public / private-sector working groups, as well as further clarity on the preferred end state for each IBOR.

Alongside the survey results, the report includes a checklist of steps that firms can take to prepare for the transition to alternative RFRs. This includes:

  • mobilising a formal IBOR transition program and allocating budget and staffing;
  • assessing exposure and the anticipated roll-off of IBOR exposures;
  • understanding the impact of a permanent cessation of an IBOR, reviewing fall-back provisions within existing contracts and making amendments where necessary;
  • communicating with clients and counterparties early; and
  • defining a transition roadmap for the organisation.