ibortransition.bmo.com Open in urlscan Pro
162.159.134.42  Public Scan

Form analysis
0 forms found in the DOM

Text Content

Skip to content
Skip Navigation
Mobile Navigation Menu Button

Home Corporate Responsibility Personal Wealth Management Small Business Capital
Markets About BMO
CA - English


SELECT REGION/LANGUAGE

 * 
 * Canada
 * English
 * Français
 * 
 * US
 * English


SELECT REGION/LANGUAGE

 * CANADA
   
   * English
   * Français


CA - English


SELECT REGION/LANGUAGE

 * 
 * Canada
 * English
 * Français




Top





IBOR TRANISITION


IBOR TRANSITION

--------------------------------------------------------------------------------

BMO has established the IBOR Transition Office to lead and coordinate transition
efforts for the bank and to ensure efficiency and a positive client experience.
While the breadth of the change is wide-reaching, by working in collaboration
with our clients, BMO expects that we will be able to successfully move forward
together.


--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Overview LIBOR Resources LIBOR FAQs CDOR Resources CDOR FAQs Industry Groups
Newsletters Key Dates




What is IBOR/LIBOR?
Interbank Offered Rates (IBORs), including the London Interbank Offered Rate
(LIBOR), are the rates at which banks can borrow in the interbank market on an
unsecured basis. LIBOR is the most widely-used and well-known interest rate
benchmark, and is calculated based on submissions from individual panel banks.

LIBOR was published daily in five currencies (British Pound Sterling (GBP), U.S.
Dollar (USD), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY)) and seven
maturities (overnight, one week, one month, two months, three months, six
months, and one year). Other IBORs impacted by the transition include: the Tokyo
Interbank Offered Rate (TIBOR), the EUR Interbank Offered Rate (EURIBOR), and
the Canadian Dollar Offered Rate (CDOR).

Why is LIBOR Going Away?
LIBOR’s sustainability and integrity have increasingly been called into question
for two reasons: (1) a decline in the interbank unsecured funding market has led
to a lack of actual transaction data upon which to calculate the rates; and (2)
the ease with which it has been manipulated, most notably during the 2012 LIBOR
scandals, has led to a deterioration of the confidence in the rate setting
process. The UK Financial Conduct Authority announced in July 2017 it would no
longer compel banks to contribute to LIBOR after December 31, 2021.

What’s Next? Alternative Reference Rates
Regulators and global industry working groups have identified Alternative
Reference Rates (ARRs) derived from transactional data to serve as IBOR
replacements. Jurisdictions around the globe have since selected ARRs based on
transactions in overnight funding markets. The following rates have been
selected for the United States and Canada:

United States: SOFR
Canada: CORRA

 

Challenges
Firm’s will face significant operational and infrastructure updates, including
technology, risk modeling, underlying legal documentation, volume of legacy
contracts, hedging implications, and possible accounting issues. BMO established
the IBOR Transition Office to ensure all areas of BMO were prepared for the
transition and BMO’s clients are equipped for the industry and regulatory
changes to come.

What Firms Should Start Thinking About
Despite industry efforts to guide market participants in this transition,
individual firms will need to make their own plans for the transition. Key areas
impacted by the transition include project governance/ management, exposure and
impact analysis, risk management, contractual remediation and infrastructure/
technology readiness. 

 

 

The content of this webpage reflects BMO’s current understanding of the IBOR
Transition and is for informational purposes only. This information does not
constitute and shall not be construed to constitute legal, financial, tax,
accounting, or regulatory advice by BMO or its affiliates. BMO makes no
representation as to the accuracy, completeness, suitability or timeliness of
such information, which may also be subject to change.






BMO has prepared numerous educational and informational materials tailored to
specific aspects of the transition which can be found below.

LIBOR Transition Alternatives- Fallback Explainer (April 2023)

This fallback explainer outlines the ISDA Fallback Protocol Methodology and
explain the nuances of relying on fallback provision.

Changes to Mandatory Clearing Requirement (August 12th, 2022)

In support of the transition from LIBOR to Alternative Reference Rates (ARRs),
the U.S. Commodity Futures Trading Commission (CFTC) has published updates
relating to their respective clearing requirements.

IBOR Transition Nov 3 Panel Discussion Recording (November 3rd, 2021)
November 3rd panel discussion on BMO’s transition strategy, current industry
updates, timelines and overall impacts of the transition. The panel was
moderated by Dave Casper, our U.S CEO. He was joined by other BMO Senior
Leaders, as well as a key industry expert from the CME Group.

ISDA's RFR Conventions and IBOR Fallbacks (October 4th, 2021)
 This document covers a summary of the next steps for contract remediation, ISDA
2020 IBOR Fallbacks, the ISDA RFR Conventions and a IBOR Fallbacks Product Table
for various different products, including certain non-linear products.

IBOR Transition: Moving Towards Alternative Reference Rate Benchmarks Recording
(July 14th, 2021)
BMO hosted a webinar on July 14, 2021, for BMO employees and clients. The
recording covers information on Alternative Reference Rates (including BSBY,
Term SOFR), market liquidity, pricing, and hedging with ARRs.

FCA Announcement on the End of LIBOR (March 2021)
On March 5, 2021, the UK Financial Conduct Authority (FCA) made an official
statement on the end of LIBOR. This letter serves to notify clients of the
cessation dates for all LIBOR settings and the fixing of Spread adjustments
which will be used in IBOR Fallback language.

Fallback Language Trigger Event Notice (March 2021)
 This letter serves to notify clients that may be a party to a loan agreement or
note which reference LIBOR or CDOR where BMO is the sole lender or the
administrative agent for a syndicate of lenders of the UK Financial Conduct
Authority (FCA) official statement on the end of LIBOR.

IBOR Transition Client Communication: ISDA Fallbacks Protocol (January 2021)
The International Swaps and Derivatives Association (“ISDA”) published the ISDA
2020 IBOR Fallbacks Protocol and Supplement to the 2006 ISDA Definitions on
October 23, 2020.

 

 

In addition to the above materials, BMO continues to develop additional
informational and educational items around this transition. For information on
the various resources available please reach out to your BMO contact or the IBOR
Transition Office (IBOR.Transitionoffice@bmo.com).

 

 

The content of this webpage reflects BMO’s current understanding of the IBOR
Transition and is for informational purposes only. This information does not
constitute and shall not be construed to constitute legal, financial, tax,
accounting, or regulatory advice by BMO or its affiliates. BMO makes no
representation as to the accuracy, completeness, suitability or timeliness of
such information, which may also be subject to change.

Disclosure

IBOR Risk Disclosure - Derivatives Transactions






Questions on SOFR (April 13th, 2021)
This document provides answers to questions related to SOFR.

Questions on Contractual Fallback Language and the ISDA Protocol (April 13th
2021)
This document provides answers to questions related to fallback language and the
ISDA Protocol.

General Questions on IBORs and LIBOR (March 24th, 2021)
This document provides answers to some general questions on IBORs and LIBOR.

 Questions on SONIA €STR and Enhanced CORRA (March 24th 2021)
This document provides answers to questions related to SONIA, €STR and CORRA. 

BMO US Business Banking LIBOR Transition FAQs (December 15th, 2020)
This document provides answers to questions related to BMO's US Business Banking
products.  

 

The content of this webpage reflects BMO’s current understanding of the IBOR
Transition and is for informational purposes only. This information does not
constitute and shall not be construed to constitute legal, financial, tax,
accounting, or regulatory advice by BMO or its affiliates. BMO makes no
representation as to the accuracy, completeness, suitability or timeliness of
such information, which may also be subject to change.

Disclosure

IBOR Risk Disclosure - Derivatives Transactions






The Canadian Alternative Reference Rate Working Group (CARR) was created to
ensure Canada's interest rate benchmark regime is robust, relevant and effective
in the years ahead. Find more information on our background, access key
documents, market notices, meetings and membership

1.Updates from the BA transition Virtual Network ( September 15 2023)

2.CARR's allowable use cases for Term CORRA (August 29 2023)

3. The launched of Term CORRA on September 5, 2023 (August 10 2023)

4. CARR publishes CDOR transition FAQs (August 2 2023)

5.CARR's recommendation for transitioning loans from CDOR to CORRA and  a "No
New CDOR or BA loan" Milestone (July 27, 2023)

6.Transitioning Loans from CDOR to CORRA- Best Practices (July 27,2023)

7. CARRs recommendations for legacy Securities tied to CDOR (June 30, 2023)

8. Implications for transactions as stage 1 ends and stage 2 begins in the CDOR
transition (June 9, 2023)

9.CDOR Transition Roadmap and Milestones

 * CDOR Transition-Impact Assessment Checklist published by CARR (April 2023)

10.CARR and TMX Webcast Series on CDOR Transition

 * First webcast of CDOR Transition Series - Transition Roadmap (January 2023)
 * Second webcast of CDOR Transition Series - The transition of Canadian
   derivatives to CORRA (February 2023)
 * Third webcast of CDOR Transition Series - The transition of Canadian cash
   securities to CORRA (March 2023)
 * Fourth webcast of CDOR Transition Series- Creating an IOSCO compliant Term
   CORRA rate (May 2023)

11. CDORs impact on Bankers' Acceptance

 * White paper published by CFIF (January 2023)

12. Developing a Forward-looking Term CORRA benchmark (January 2023)

13. Recommended Conventions

 * Recommended Conventions for Term CORRA swaps and basis swaps (November 2023)
 * CORRA FRN conventions Contractual terms for floating notes referencing CORRA
   (November 2021)
 * Inter-bank swap conventions for CDOR-SOFR and CORRA-SOFR Contractual terms
   for swaps between two banks that reference CORRA and either CDOR or SOFR
   (November 2021)
 * CORRA Loan conventions A worked example of these conventions and a comparison
   to conventions in other jurisdictions (November 2021)
 * Methodology for CORRA compounded-in-arrears Overview of the methodology
   (November 2021)

14. Recommended Fallback Language

 * * CDOR-based loans
   * FRNs referencing CDOR
   * FRNs referencing CORRA
   * ISDA’s Fallbacks Supplement - Legal language that describes what happens to
     derivatives written under ISDA’s standard definitions. 






How has Canada approached interest rate benchmark reform?

The Canadian Alternative Reference Rate Working Group (CARR), sponsored by the
Canadian Fixed-Income Forum, was established to coordinate Canadian interest
rate reform. CARR’s primary objectives include:

 * analyze the current status of the Canadian Dollar Offered Rate (CDOR) and its
   efficacy as a benchmark, as well as make recommendations on the basis of that
   analysis; and
 * support and encourage the adoption of, and transition to, the Canadian
   Overnight Repo Rate Average (CORRA) as a key financial benchmark for Canadian
   derivatives and securities.

What is CDOR?

CDOR is a benchmark reference rate for bankers’ acceptance (BA) borrowings
denominated in Canadian dollars that is administered and posted daily by
Refinitiv Benchmark Services (UK) Limited (RBSL).

CDOR is based on a survey of the principal market-makers for Canadian dollar BA
(currently, the six largest Canadian banks) who are asked to provide rates at
which they would be willing to lend (offer) funds against primary BA market
issuances to clients with existing credit facilities that reference CDOR plus a
fee. CDOR is quoted for terms to maturity of:

 * up to and including May 14, 2021: one, two, three, six and twelve months
 * from May 17, 2021 onwards: one, two, and three months.

What is CORRA?

The Canadian Overnight Repo Rate Average (CORRA) is a measure of the average
cost of overnight secured funding.  It is the trimmed median repo rate comprised
of both inter-dealer and dealer-to-client trades where data can be obtained. The
lower volume-weighted 25th percentile is trimmed with the intent to exclude
“specials” and just include general collateral.

In July 2018, CARR, aligning with international benchmark reform, identified
CORRA as the rate “best meeting its criteria for a domestic risk-free rate
(RFR)”.

Transition from CDOR to CORRA

All contracts indexed to CDOR and maturing after cessation will need to be
renegotiated or transitioned on or before cessation of the index.  Market
participants are encouraged to review their contracts and assess the need for
fallback language to help prepare for the Transition.

When will the transition start and what is the timeline?

CARR outlines the processes and timelines needed for the transition from CDOR
for Canadian market participants in the Transition Roadmap

While CARR has presented its recommendations, the decision to cease publication
of CDOR ultimately lies with RBSL. Only a notice from RBSL announcing the
cessation of CDOR would trigger the start of the CARR recommended stages of
transition.

 * Stage 1: will run until June 30, 2023. By the end of stage 1 all new
   derivatives contracts and cash securities can only use CORRA, with no new
   derivatives or cash CDOR-based transactions after June 30, 2023, except in
   limited circumstances. 
 * Stage 2: will run until June 30, 2024, to provide firms with incremental time
   to transition their loan agreements and allow for more existing CDOR-based
   cash securities exposures to mature prior to cessation. CDOR will cease to be
   published after June 30, 2024.

What are the key differences between CDOR and CORRA?

CORRA is fundamentally different in nature than CDOR.

 * CDOR
   * Unsecured rate at which banks are willing to lend
   * Canadian BA market participants
   * Based on submissions solely from major Canadian banks
   * Forward-looking rate with term rates
   * Built-in credit component based on credit conditions in the Canadian BA
     market
   * Monthly volume of CAD $200-250 billion
 * CORRA
 * * Secured borrowing rate (nearly risk-free)
   * Broad array of market participants (multiple industries)
   * Fully based on repo transactions
   * Currently a backward-looking overnight rate
   * No credit component; comparing relative value will need an adjustment
   * Expected to be based on CAD $10-20 billion of underlying daily transactions

Do I need to wait until CDOR is permanently discontinued to replace it with
CORRA?

No, you do not need to wait until CDOR is permanently discontinued to replace it
with CORRA. Some market participants may choose to voluntarily amend CDOR-linked
transactions without waiting for the actual cessation of CDOR. In some cases, it
may be more efficient for market participants to execute new transactions to
transition a contract or portfolio from CDOR to CORRA. Alternatively, some
market participants may choose to undertake various bilateral or multilateral
portfolio compression exercises to reduce the number of transactions on their
books.

CDOR Transition FAQs- This document provides answers to more general questions
on CDOR transition.

 






Industry groups have been established globally to assist market participants in
the transition away from IBORs.  The below are industry groups that have been
established in different jurisdictions.

Alternative Reference Rate Committee (ARRC)
The ARRC was convened in 2014 by the Federal Reserve to identify alternative
reference rates to replace USD LIBOR and recommended the Secured Overnight
Financing Rate (SOFR) as it preferred alternative rate. SOFR is an overnight,
secured referenced rate administered by the Federal Reserve Bank of New York
that broadly measures the cost of overnight borrowing with U.S. Treasuries as
collateral. It is firmly based on transaction data and is calculated as a
volume-weighted median of tri-party repo transactions.

Canadian Alternative Reference Rate Working Group
The Canadian Alternative Reference Rate Working Group (CARR) was created to
identify and seek to develop a new term risk-free Canadian dollar interest rate
benchmark. CARR has decided to enhance an existing rate, the Canadian Overnight
Repo Rate Average (CORRA).

International Swaps and Derivatives Association (ISDA)
ISDA has published a central hub on its website with information on the
transition from LIBOR and the adoption of alternative risk-free rates. This hub
features updates on ISDA’s work on fallbacks and other benchmark initiatives, as
well as research and analysis. The benchmarks hub serves as a one-stop shop for
information from ISDA on benchmark reform.

Working Group on Sterling Risk-Free Reference Rates
The overall objective of the Working Group is to accelerate a broad-based
transition to SONIA by end-2021 across sterling bond, loan and derivative
markets, in order to reduce the financial stability risks arising from
widespread reliance on LIBOR. The Working Group recommended the Sterling
Overnight Indexed Average (SONIA) as the preferred sterling risk-free rate as it
has capability to evolve over time, tends to be predictable and tracks Bank
Rates closely. SONIA is already referenced in the sterling OIS market, making
the transition easier. It measures the rate paid by banks on overnight funds and
is calculated as a trimmed mean of rates paid on overnight unsecured wholesale
funds.

Working group on Euro Risk-Free Rates
The European Central Bank (ECB), the Belgian Financial Services and Markets
Authority (FSMA), the European Securities and Markets Authority (ESMA) and the
European Commission launched a private sector working group on euro risk-free
rates. The working group was tasked with identifying an alternative RFR to serve
as a basis for an alternative to the current benchmarks used in a variety of
financial instruments and contracts in the Euro area. The Working Group
recommended €STR as its preferred nearly risk-free rate for the Euro area.

National Working Group on Swiss Franc Reference Rates (NWG)
The NWG on CHF Reference Rate is the key forum to reform reference interest
rates in Switzerland. The Working Group selected SARON, which is an overnight
reference rate of the secured funding market for Swiss franc and is based on
transactions and quotes posted in the Swiss repo market.

Canadian Alternative Reference Rate Working Group
The Canadian Alternative Reference Rate Working Group (CARR) was created to
identify and seek to develop a new term risk-free Canadian dollar interest rate
benchmark. CARR has decided to enhance an existing rate, the Canadian Overnight
Repo Rate Average (CORRA).

 

 

The content of this webpage reflects BMO’s current understanding of the IBOR
Transition and is for informational purposes only. This information does not
constitute and shall not be construed to constitute legal, financial, tax,
accounting, or regulatory advice by BMO or its affiliates. BMO makes no
representation as to the accuracy, completeness, suitability or timeliness of
such information, which may also be subject to change.

Disclosure

IBOR Risk Disclosure - Derivatives Transactions






The BMO IBOR Transition Newsletters are sent out quarterly to clients. The
purpose of this newsletter is to provide the latest updates and industry
developments regarding the transition from IBORs to alternative nearly risk-free
rates (RFRs).

The newsletter provides summarized jurisdictional highlights from the global
regulatory community, industry working groups, and various industry news
sources.

If you would like to receive these quarterly newsletters, please email
IBOR.TransitionOffice@bmo.com to be added to the distribution list.

                                                                       
 Newsletters

2023

September 2023 Newsletter

June 2023 Newsletter

March 2023 Newsletter

2022

December 2022 Newsletter

September 2022 Newsletter

June 2022 Newsletter

March 2022 Newsletter

February 2022 Newsletter

January 2022 Newsletter

2021

December 2021 Newsletter

November 2021 Newsletter

October 2021 Newsletter

September 2021 Newsletter

August 2021 Newsletter

   

 

 

The content of this webpage reflects BMO’s current understanding of the IBOR
Transition and is for informational purposes only. This information does not
constitute and shall not be construed to constitute legal, financial, tax,
accounting, or regulatory advice by BMO or its affiliates. BMO makes no
representation as to the accuracy, completeness, suitability or timeliness of
such information, which may also be subject to change.

Disclosure

IBOR Risk Disclosure - Derivatives Transactions






 

CDOR

Dates        Events 

January 9th, 2023

 * CORRA-first initiative for interbank linear derivatives

March 27th, 2023

 * CORRA-first initiative for interbank non-linear derivatives and cross
   currency basis swaps 

June 30th, 2023

 * Contracts referencing LIBOR are expected to be transitioned by this date
 * No new CDOR-linked securities or derivatives contracts except where hedging
   underlying products indexed to CDOR
 * Loans may continue to reference CDOR after this date, until additional
   guidance/timelines are established
 * The following activities referencing CDOR will still be permitted

June 28th, 2024

 * Cessation of the one-, two-, and three-month CDOR settings
 * Contracts referencing CDOR are expected to be transitioned by this date

 

LIBOR

Date         Events June 30th, 2023
 * Cessation of the overnight and one-, three-, six- and 12-month USD LIBOR

 

 

Key Dates updated as of May 25, 2023. 

The content of this webpage reflects BMO’s current understanding of the IBOR
Transition and is for informational purposes only. This information does not
constitute and shall not be construed to constitute legal, financial, tax,
accounting, or regulatory advice by BMO or its affiliates. BMO makes no
representation as to the accuracy, completeness, suitability or timeliness of
such information, which may also be subject to change.

Disclosure

IBOR Risk Disclosure - Derivative Transactions



--------------------------------------------------------------------------------

 

For additional information and/or specific questions please reach out to your
BMO sales contact, relationship manager, or the BMO IBOR Transition Office.

Contact IBOR.Transitionoffice@bmo.com

Transition Checklist

This checklist depicts key plans related to the IBOR Transition.

Download Checklist

 Upcoming Events

CARR and TMX launches webcast series on the transition from CDOR.

Register for the webcast series.

 * Email
 * Phone
 * Book Appointment
 * Find a Branch
 * Report Lost/Stolen Card

 * Facebook
 * Twitter
 * YouTube
 * RSS
 * LinkedIn

 * Privacy
 * Legal
 * Security
 * Careers
 * Investor Relations
 * Accessibility
 * Support
 * Site map
 * CDIC Member
 * 

 * Modern Slavery and Human Trafficking Statement