Standard Chartered has completed the first deal using Risk Free Rate (RFR) with their clients, Akij Ceramics Ltd and Unilever Bangladesh Ltd.
The deal was completed in line with detailed guidance from Bangladesh Bank on how to set the new rates as a replacement for The London Inter-Bank Offer Rate (LIBOR).
The London Inter-Bank Offer Rate (LIBOR) is the average interbank lending rate on an unsecured basis for banks in London. For decades, LIBOR has been the most popular benchmark reference rate used by banks and other financial institutions around the world for pricing of different debt instruments and is currently quoted for five major currencies (USD, GBP, JPY, EUR, CHF) across different tenors.
In March 2020, ICE Benchmark Administration (IBA), the authorised and regulated administrator of LIBOR, declared its intention to cease the publication of LIBOR settings after 31December 2021.
This decision was further bolstered by Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and other regulatory bodies of the United Kingdom (UK). Based on this decision, Central Banks around the world, including Bangladesh Bank have given the consent for banks to transition away from LIBOR to other Risk Free Rates from 01 January 2022.
Naser Ezaz Bijoy, Chief Executive Officer, Standard Chartered Bank, Bangladesh said, “For more than three decades LIBOR has been a key indicator in global financial markets. Standard Chartered has been working with clients, regulators, and stakeholders across all our 59 markets, to support the transition from LIBOR to its more sustainable alternate RFR.”
Akij Ceramics Ltd and Unilever Bangladesh Ltd were the first two clients who accepted the offer to complete Trade Financing Transaction using the RFR. The Bank is also actively engaging with their other clients to familiarize them with the new rates.
