Standard Chartered has completed the first deal usingRisk Free Rate (RFR) with their clients, Akij Ceramics Ltd and Unilever Bangladesh Ltd. The deal was finalisedas per the detailed guidance from Bangladesh Bankon how to set the new rates as a replacement for The London Inter-Bank Offer Rate (LIBOR).
The LIBORis the average interbank lending rate on an unsecured basis for banks in London. For decades, LIBOR has been the most popular standard reference rate used by banks and other financial institutions across the globe for pricing various debt instruments and is currently quoted for five major currencies (USD, GBP, JPY, EUR, CHF) throughout different tenors.
In March last year (2020), ICE Benchmark Administration (IBA), the authorised and regulated administrator of LIBOR, declared its desire to cease the publication of LIBOR settings after December31, 2021. The decision was further reinforced by Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and other regulatory bodies of the UK. Based on this decision, Central Banks across the world, including Bangladesh Bank, have given the approval for banks to transition away from LIBOR to other Risk Free Rates from January01, 2022.
NaserEzazBijoy, 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, Risk Free Rate (RFR).”.
Sk. Bashiruddin, Managing Director,Akij Group said, “While we are still working out on the transition process with our other banks, this deal with Standard Chartered gives us a hands-on experience with this upcoming and inevitable change. I would like to thank the Standard Chartered team for guiding us through this pilot transaction and explaining in detail about the forthcoming changes.”
Zahidul Islam Malita, Finance Director, Unilever Bangladesh Ltd said, “Unilever Bangladesh is always looking forward to be a partner in pioneering dynamic shifts in the business landscape. We are proud to be one of the first companies in Bangladesh to complete a trade finance deal using the new interest rate benchmark.”.
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 working with their other clients to familiarize them with the new rates, said a press release.
