Eyes on IBOR- Update no. 6 – LIBOR’s Loan Problem.
(Last updated: )
Libor began as a convenient, consensus rate for the small club of mid 1970’s Eurodollar lenders, rising to global fame on the coat tails of the then-new derivatives markets. It also continued with ever-wider adoption as a reference rate for loans- it is these more “simple” products that potentially present the more challenging LIBOR transition prospect. For derivatives, the ISDA IBOR Fallback protocol went “live” on 23 October 2020, as of today it has 756 adherents. Although already a success and covering an extensive range of documents, the Protocol is far from a silver bullet for the derivatives market, necessarily applying to only the most standardised products. There is no protocol mechanism for more bespoke markets such loans or bonds.