Dear Commonwealth Bank Customer,
We are contacting you as you have entered into a transaction with the Commonwealth Bank of Australia that references LIBOR1, EONIA2, or EURIBOR3 (collectively known as ‘IBORs’). We want you to know about expected changes to these IBORs and the effect they may have on your contracts.
In July 2017 the UK’s Financial Conduct Authority announced that from 1 January 2022 it would no longer compel panel banks to submit the rates required to calculate LIBOR. It is unclear whether LIBOR will continue to exist in all currencies (USD, CHF, JPY, EUR, and GBP) beyond this date.
In addition, from 1 January 2022, the European Benchmark Regulation may limit the use of EURIBOR and EONIA.
Transactions that reference an IBOR face significant uncertainty. Industry groups, market participants and regulators recognise the weaknesses of existing contractual fall-back arrangements that apply if an IBOR is permanently discontinued. These fall-backs could lead to unexpected outcomes such as contractual frustration, termination and/or economic value transfer. Industry groups are leading efforts to develop approaches, including new fall-backs, to limit market disruption if an IBOR is permanently discontinued.
Central bank working groups have already identified alternative benchmark rates. How and when the market adopts these rates is not clear at this stage, but any transition might mean changes to your contracts and how you manage risk.
If you have questions, please contact your Commonwealth Bank representative.
1 London Inter Bank Offer Rate
2 European Over Night Index Average
3 Euro Interbank Offered Rate
This information is published solely for information purposes and is not to be construed as a solicitation, an offer or recommendation by the Commonwealth Bank of Australia. The information may be incomplete or not up to date and may contain errors and omissions. It must not be relied upon as financial product advice and is not investment research. As this information has been prepared without considering your objectives, financial situation or needs, you should before acting on the information, consider its appropriateness to your circumstances, and if necessary, seek the appropriate professional advice. We believe that this information is correct at the time of publishing and any opinions, conclusions or recommendations are reasonably held based on the information available at the time of its compilation but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made.
Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian credit licence 234945.