Journal Article: The market transition pathway from LIBOR to “risk-free” rates: 16 April 2018

In an article for Butterworth’s Journal of International Banking and Finance Law, Dr Perkins and Jennifer Enwezor, former Project Manager at the FMLC Secretariat, examine the difficulties in the transition from IBOR benchmarks to alternative risk-free rates (“RFRs”). They consider the question asked frequently in relation to the LIBOR transition—whether the move from a single calculation methodology to multiple methodologies in multiple jurisdictions will have significant negative impact—and determines that it is likely to be less of an obstacle than market discussions would suggest.

Yet there are other issues which are likely to make the upcoming transition rough: the economic divergence between LIBOR and the RFR over the lifetime of a contract and question of how an overnight RFR will serve as an appropriate substitute for a benchmark with longer tenors. The article examines these questions against the backdrop of the Financial Stability Board’s 2013 review of benchmarks and concludes that the transition might be rough but passable.

Available as: PDF