Interbank Offered Rates – new risk free benchmark rates are being developed

What are benchmark rates?

Benchmark rates are used in financial transactions throughout our economy and are an integral part of interest rate markets. All banks, including AIB, use them in the pricing of many products.

What are Interbank Offered Rates (IBORs) and why are they being reformed?

Benchmark rates, such as IBORs, have long been relied on by banks to set interest rates for lending. As they are key to the financial system, they have been subject to increasing regulation and review.

What are the alternatives?

New alternative reference rates are being proposed to replace IBORs. They include risk free rates which are based on transactions which have already taken place, making them more transparent and robust.

Who will be impacted by these changes?

All banks offering products based on IBORs will be affected. If you have a contract with us which relates to an IBOR this might need to be amended at some point in the future. If this is the case, we will communicate with you.

What are we doing to get ready for the change?

While the effects of IBOR Transition are not yet fully clear, we will monitor and respond to how the market evolves and regulatory guidance, to help ensure a smooth and effective transition.

What will happen next?

We are monitoring the situation and will update this website as IBOR transition develops. If changes to products or documentation are needed, we will communicate with you.

We recommend reading our IBOR Transition guide for more information on the changes and next steps. 


You can also consider whether you require guidance from your professional advisors on the possible implications of any changes, including from a financial, legal, accountancy or tax perspective.




To download our full
IBOR Transition Guide
Click here

What alternative reference rates will replace IBORs?

--------------------Start of Accordion Container---------------------------

Click on edit button to enter Accordion Header

Frequently Asked Questions

  • --------------------Start of Accordion---------------------------

    What is a Benchmark Rate?

    Benchmark Rates are used in financial transactions throughout our economy, for example, to calculate interest rates for loans.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What are IBORs?

    Interbank Offered Rates represent an estimate of how much it would cost a bank to borrow money from other banks. IBORs are published in several currencies and for a variety of interest periods.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What is LIBOR?

    The London Interbank Offered Rate. This is calculated from estimates submitted by a selection of banks in London.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What are Alternative Reference Rates (ARRs)?

    They are benchmark rates which are being developed as an alternative to IBORs.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    Why are IBORs being replaced?

    IBORs are based on forward looking estimates of how much it costs for a bank to borrow money from other banks in the interbank lending market. The activity in this market has been declining gradually. ARRs, such as Risk Free Rates, are being introduced because they are based on transactions which have already taken place in markets which are very active, making them more accurate and robust.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What are Risk Free Rates?

    Risk Free Rates are a type of ARR. They are overnight rates, based on transactions which have already taken place.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    How are Risk Free Rates different to IBORs?

    Risk Free Rates are based on information from transactions which have already taken place. They will therefore be less reliant on the judgement of banks.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    When do the changes to IBORs come into effect?

    ARRs for LIBOR need to be in place by 31 December 2021. A timeline for having ARRs for EURIBOR is unclear at this time.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What is SONIA?

    The Sterling Overnight Index Average which is the new Risk Free Rate for Sterling transactions.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What is SOFR?

    The Secured Overnight Financing Rate which is the new Risk Free Rate for Dollar transactions.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What is €STR?

    The Euro Short Term Rate which is the new Risk Free Rate for Euro transactions.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What is EURIBOR and how is it changing?

    The Euro Interbank Offered Rate. EURIBOR has been reformed to meet the requirements of the EU Benchmarks Regulation, to include in its calculation, information based on transactions that have already taken place. €STR may replace EURIBOR in the future, however it is likely that in the short term, banks will continue to use EURIBOR.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    Are all Banks impacted?

    All banks which offer products based on IBOR rates are impacted.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What are we doing to get ready for this change?

    We are monitoring this situation and will provide customers with further information as things progress.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What does this mean for me?

    If you have a contract with us that relates to an IBOR, this might need to be amended at some stage in the future. If this is the case, we will communicate with you.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What if I am unsure about these changes?

    Should you wish to discuss the impact of IBOR transition on any of the products you hold with us, please email IBOR.QUERY@aib.ie or your Relationship Manager.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    What are the next steps?

    Whether you are taking out a new product, or you are an existing customer, we are making you aware that IBOR transition may require us to make changes to products or documentation. In either case, if you are affected by these changes we will communicate with you.

    --------------------End of Accordion---------------------------

  • --------------------Start of Accordion---------------------------

    Where can I go for more information?

    IBOR.QUERY@aib.ie or your Relationship Manager.


    In addition the following websites may be useful:


    Europe

    https://www.ecb.europa.eu/home/html/index.en.html


    UK

    https://www.bankofengland.co.uk/

     

    Search for IBOR Transition or Benchmark Reform – these sites are not owned by AIB and links may be updated from time to time

    --------------------End of Accordion---------------------------

-------------------End of Accordion Container---------------------------


For a PDF of our
Frequently Asked Questions
Click here

Web disclaimer

This content of this webpage is provided for information only and may not represent the views or opinions of Allied Irish Banks, p.l.c. or its affiliates (collectively, AIB), employees or officers. This information does not constitute and shall not be construed to constitute legal, tax and/or accounting advice by AIB. AIB makes no representation as to the accuracy, completeness, suitability or timeliness of such information, which may also be subject to change.

 

This information and any documents provided with it should not be used or relied upon by any person/entity (i) for the purpose of making investment or regulatory decisions, (ii) to provide regulatory advice to another person/entity based on matter(s) discussed herein or (iii) in connection with any transaction, contract or communication.

 

Recipients of this communication should obtain guidance and/or advice, based on their own particular circumstances, from their own professional advisors (legal, tax, accounting or otherwise) in light of benchmark transitioning as they consider necessary. Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate definitive written agreements. This information is not a commitment or firm offer and does not oblige us to enter into such a commitment, nor are we acting as a fiduciary to you.

 

Any transaction which you may enter into with AIB will be on the basis that you have made your own independent evaluations, without reliance on AIB, and based on your own knowledge and experience and any professional advice which you may have sought in relation to all aspects of the transaction including, without limitation, legal, accounting and/or taxation advice. In no event will AIB be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising whether in contract, tort (including negligence), breach of statutory duty, or otherwise, arising out of, or in connection with, your use of (or failure to use) this information.

 

We encourage you to keep up to date with the latest industry developments in relation to benchmark transitioning and to consider its impact on your or your business. You should consider, and continue to keep under review, the potential impact of benchmark transitioning on any existing product you have with AIB, or any new product you enter into with AIB.