The London Interbank Offered Rate, a benchmark that underpinned
financial transactions for decades, is being phased out due to
several concerns. In its wake, alternative reference rates or ARR,
emerge as the chosen successor—a suite of reference rates
designed to be more robust, transparent, and reflective of the
current financial markets.
Transition
LIBOR is an interest rate based on the average reported interest
rate at which major global banks can borrow from each other on an
unsecured basis. It's published for five currencies—the
euro, Swiss franc, Japanese yen, pound sterling, and US dollar.
In the fallout of the global financial crisis of 2008, questions
around LIBOR's validity as a benchmark rate arose.
Consequently, the Intercontinental Exchange Benchmark
Administration decided to cease publication of LIBOR in a phased
manner from Dec. 31, 2021 to June 30, 2023. Post June 30, the
publication of LIBOR rates has completely ceased for
