Interest rate benchmarks are a cornerstone of the global financial system and are used by market participants across a wide range of financial products and contracts. In 2013, the Financial Stability Board (FSB) established the Official Sector Steering Group (OSSG) to advise the FSB on recommendations to strengthen existing interbank offered rate benchmarks. This global work is now at a key inflection point with the confirmation that LIBOR, a key global interest rate benchmark, will cease being published at end-2021 (and end-June 2023 for key USD LIBOR tenors). As LIBOR’s cessation nears, global liquidity is expected to shift to products referencing risk-free rates, even in countries like Canada where LIBOR is not a predominant rate.
To coordinate Canadian interest rate reform, Canada established the Canadian Alternative Reference Rate Working Group—sponsored by the Canadian Fixed-Income Forum.
CARR’s primary objectives will be to:
- 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; and
- 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.
CARR also oversees the CORRA Advisory Group.
- CDOR White Paper
See the executive summary and size and scope of CDOR and BAs.
Read related statements from RBSL and ISDA.
- Transition Roadmap
Outline of the processes and timelines needed for the transition from CDOR for Canadian market participants
- Canadian benchmark reform presentation
Detailed overview of the progress of Canadian benchmark reform efforts
- Presentation to CFIF on CDOR
CARR’s key findings in its stock take on CDOR and CORRA
- Quick background Canadian benchmark reform
Overview of Canadian benchmark reform efforts
- Enhancements to CORRA calculation methodology
Description of improvements to the way CORRA is calculated, implemented when the Bank of Canada became CORRA’s administrator
- Risk-free rates in other jurisdictions
Overview of the main risk-free interest rates used globally
Conventions and fallback language
- CORRA FRN conventions
Contractual terms for floating rate notes referencing CORRA
- 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
- CORRA loan conventions
Also: a worked Excel example of these conventions and a comparison to conventions in other jurisdictions
- Methodology for CORRA compounded-in-arrears
Overview of the methodology
Recommended fallback language
- CDOR FRN fallback language
Language to include in FRNs referencing CDOR to describe what happens to the FRN if CDOR is discontinued. See also the consultation paper.
- CORRA FRN fallback language
Language to include in FRNs referencing CORRA to describe what happens to the FRN if CORRA is discontinued.
- ISDA’s Fallbacks Supplement
Legal language that describes what happens to derivatives written under ISDA’s standard definitions. See pages 69-76 for Canadian rates.
Managing Director and Vice-Chair, Global Markets
CIBC Capital Markets
Alberta Investment Management Corporation
National Bank of Canada
Bank of America Merrill Lynch
Ontario Financing Authority
Bank of Montreal
Ontario Teachers’ Pension Plan
Canada Mortgage and Housing Corporation
Quebec Ministry of Finance
Canadian Imperial Bank of Commerce
Royal Bank of Canada
Samuel, Son & Co
Sun Life Financial
Rotman School of Management