StanChart completes first deal using risk-free rate

Standard Chartered has completed the first deal using risk-free rate (RFR) with its clients, Akij Ceramics Ltd and Unilever Bangladesh Ltd.

The deal was completed in line with the detailed guidance from the Bangladesh Bank on how to set the new rates as a replacement for the London Interbank Offered Rate (Libor), according to a press release.

The Libor is the average interbank lending rate on an unsecured basis for banks in London. For decades, it has been the most popular benchmark reference rate used by banks and other financial institutions around the world for pricing of different debt instruments.

In March 2020, the ICE Benchmark Administration, the authorised and regulated administrator of the Libor, declared its intention to cease the publication of the Libor settings after December 31, 2021.

The BB has given its consent to banks to transition away from the Libor to other risk-free rates from 1 January 2022.

Speaking in the press release, Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bangladesh, said Standard Chartered had been working with clients, regulators, and stakeholders to support the transition from the Libor to its more sustainable alternative RFR.

"The completion of the first RFR-based trade finance transactions with Akij and Unilever is the outcome of the significant collaboration that the bank has facilitated to prepare for the transition ahead of the effective date of January 1."

Sk Bashiruddin, managing director of Akij Group, said, "While we are still working out on the transition process with our other banks, this live deal with Standard Chartered gives us a hands-on experience with this upcoming and inevitable change."

Zahidul Islam Malita, finance director of Unilever Bangladesh, said, "As we make this transition ahead of time from the Libor to the new RFR that is yet to be effectuated on a global scale from next year, we believe that this will pave the path for other organisations to follow suit and explore their opportunities in global trade finance."

The bank is actively engaging with other clients to familiarise them with the new rates in order to ensure that the transition for the clients is smooth, the press release added.