It’s hard to skip the nitty gritty if you really want to understand how to migrate to new interest rates benchmarks, as the “IBORs” go into retirement. That will happen at the end of 2021 for the Libor, as the legal obligation to be on the panels behind it is scrapped. On stage at Treasury 360 Stockholm, Patrik Sandell of KPMG dug into the fine detail.
The fundamental dilemma is that transaction-based reference interest rates are great – but that they require transactions that may not be there in sufficient amount. The IBORs, interbank offered rates, have played out their role as the interbank loans between banks have decreased to a trickle, and are being replaced. The question is by what.
On the map are SOFR (US), SONIA (UK), ESTR (EU) and SARON (Switzerland). For Sweden the answer is still out there. As of today, the Stockholm interbank offered rate (STIBOR) is the benchmark for loans amounting to 35–40 trillion SEK.
Different bids for reference rates can differ in terms of how many days they aggregate into average calculations. The fewer the days, the more sensitive the calculation becomes in relation to temporary shifts.