The IBOR Transition Process and TLREF Works

The IBOR Transition Process and TLREF Works

As part of the benchmark reform for the process of transition to TLREF (the “IBOR Transition Process”) in Turkey, The National Working Committee (the committee) has been working in coordination with the relevant institutions regarding TLREF, a Turkish Lira reference rate to meet the need for a TRY reference rate in derivative products, debt instruments and various financial contracts in compliance with international standards.

TLREF is a benchmark based on real transactions identified under liquid market conditions for financial institutions and non-financial sector. TLREF has been published daily by Borsa Istanbul since June 17, 2019. With the use of TLREF the aim is to allow for long-term Turkish Lira borrowing/loaning in addition to ensuring that the Turkish Lira swap market that will develop with TLREF and consumption and investment transactions will be less affected by rate fluctuations and financial product diversity will be increased.

The calculation, implementation and publication of the Turkish Lira Interbank Offer Rate (TRLIBOR) and the Turkish Lira Interbank Bid Rate (TRLIBID) monitored and published by the Banks Association of Turkey will be ceased within reasonable time to be replaced by TLREF. In this context, floating-rate financial products will use TLREF instead of TRLIBOR or TRLIBID.

The Committee was established pursuant to the request and assignment of the relevant institutions and organizations for the purpose of conducting the TLREF works. The Committee has representatives from the Central Bank of the Republic of Turkey, the Banking Regulation and Supervision Agency, the Capital Markets Board, Borsa Istanbul, the Settlement and Custody Bank, the Turkish Capital Markets Association, the Association of Financial Institutions, the Participation Banks Association of Turkey and the Banks Association of Turkey.

The Committee makes assessments on the following issues::

• Determine activities for the calculation and publication of the TLREF rate and the BIST TLREF Index,
• Follow international studies, regulations and recommendations,
• Prepare recommendations regarding the necessary amendments in the rules in consideration of market developments and requests,
• Ensure coordination to make sure that the IBOR transition process regarding the benchmark reform and in parallel, the IBOR transition in foreign currencies (USD, GBP, CHF, JPY and EUR etc.) proceed smoothly,
• Inform the public on works to determine and announce risk-free rates to be used as replacement for IBOR by non-resident banks and the fallback language spread to be charged on these rates,
• Ensure communication and coordination between financial institutions and customers in the works to develop technical and legal infrastructure based on the new benchmark for loan contracts to be renewed.

The Committee has 6 Sub-Working Groups (SWG) coordinated by the National Working Committee for the TLREF transition works on:

• Local Legislation and Law
• Compliance with International Regulations
• Financial Coordination, Accounting, Operation and Legal Reporting
• Quantitative Analysis and Risk
• TLREF Products
• Communication

The works are continued based on a schedule with consultancy service received from an international consultancy firm. The public will continue to be informed regularly on the works of the Committee.