LIBOR Cessation: How to Explain the End of LIBOR?
LIBOR was once embedded in hundreds of trillions of dollars of financial contracts. Now it is history. The final synthetic LIBOR settings were published on 30 September 2024, completing one of the largest benchmark transitions financial markets have undertaken.
What happened to LIBOR?
LIBOR — the London Interbank Offered Rate — was used for decades as a reference rate across loans, bonds, interest rate swaps (IRD) and other derivatives.
Regulators moved markets towards alternative risk-free rates (RFRs), such as SONIA for sterling and SOFR for US dollars. Unlike LIBOR, which relied on submissions from a panel of banks, these alternative benchmarks are designed to be grounded in much larger volumes of transaction data.
That process is now complete. Three-month synthetic sterling LIBOR ceased on 28 March 2024, and the final 1-, 3- and 6-month synthetic US dollar LIBOR settings ceased after publication on 30 September 2024. All 35 LIBOR settings have therefore permanently ceased.
Why LIBOR fallbacks can be difficult to explain
The principle sounds straightforward: when LIBOR disappears, use another rate. The mechanics are more complicated.
LIBOR was a forward-looking term rate, meaning the applicable rate could generally be known at the beginning of an interest period. Many RFRs are overnight rates that can be compounded retrospectively. For derivatives covered by ISDA fallbacks, the replacement methodology therefore combines an adjusted risk-free rate with a fixed spread adjustment intended to account for structural differences between LIBOR and the replacement RFR.
That introduces concepts such as observation periods, compounding, fixing dates, business-day adjustments and spread calculations — exactly the kind of information that can become difficult to communicate through text alone.
Explainer videos for finance can make technical change visible
Benchmark reform illustrates a wider communication problem for financial institutions. Clients do not necessarily need to become derivatives specialists. They do, however, need enough understanding to see what is changing, why it is changing and what the practical consequences are.
LIBOR Cessation Client Case Study: Crédit Agricole CIB
Iksplein developed a finance animation explaining the LIBOR cessation process and the mechanics of fallback rates for a financial institution.
The communication challenge was substantial.
The subject combined regulatory change with detailed interest rate swap mechanics, including risk-free rates, spread adjustments, accrual periods, spot lags, backward shifts and fixing dates. The intended audience needed to understand both the overall transition and what it could mean for existing transactions.
The video uses a progressive visual explanation rather than presenting the entire calculation at once. It first establishes the move from IBORs to RFRs, before introducing the fallback mechanism and its components. Worked examples then visualise how dates are adjusted to establish the relevant RFR observation period and determine a fallback rate.
This article is for general educational and marketing purposes and does not constitute legal, investment or financial advice.
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