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New LIBOR is coming …. Slowly… in testing mode

ICE Benchmark Administration Limited (IBA), part of Intercontinental Exchange, Inc.,who took over the admin of libor in February 2014, and who are charged with developing the new ICE LIBOR are making progress. They have published:

  • Roadmap to ICE Libor  
  • The LIBOR Output Statement - the Definition of LIBOR and the Waterfall Methodology in which they define their methodology and approach in their quest to “evolve LIBOR so that it provides an indication of the average rate at which panel banks could obtain unsecured, wholesale funding.” 

Testing mode

IBA are now moving into testing mode. Between September 15 and December 15, 2017 (the “testing period”) IBA conducted a test during which all 20 panel banks were required to make additional LIBOR submissions using the waterfall methodology to the same production standard as, and in parallel with, their existing LIBOR submissions. IBA has calculated LIBOR1 using submissions made under the waterfall methodology for each of the 35 LIBOR currency and tenor pairs for every applicable London business day of the testing period (the “test rates”). The calculations apply the same trimmed arithmetic mean approach used to calculate LIBOR as it is currently published. 

The test rates will be published at approximately 2:00pm GMT on Saturday, March 17, 2018 on the ICE website, alongside previously published LIBOR using the existing methodology for the same period.

Reporting lines

IBA reports to a LIBOR Oversight Committee who are being very cautious about their public comments, but are driving the process to produce a fairer and more consistent rate. However, there are so many other global bodies involved and have an interest. It will be revealing to see who actually comments tomorrow.

This item appears in the following sections:
Liquidity Risk Management
% Rate Hedging & Risk Management

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