CHF Libor is replaced by SARON

The Libor, one of the most important interest rates in the global financial system, is only supported by the British Financial Markets Authority (FCA) until the end of 2021. As a result, a new reference interest rate for financing will be required at the end of 2021. In Switzerland, the National Working Group on Reference Interest Rates has proposed the SARON. The SARON (Swiss Average Rate Overnight) is an average reference rate based on actual transactions as well as on the repo market. The SARON calculation methodology was developed by the SNB and SIX (Swiss Exchange AG). The SARON is more transparent and tamper-proof compared with LIBOR, as the SARON is based on real data and not on information from various institutions. Furthermore, the SARON is publicly available and meets the requirements of international benchmark standards.

The change in the reference interest rate has various influences on the financial market. In contract law, the change to SARON affects LIBOR-linked contracts. In principle, four fates can be considered for such contracts. The contract can be terminated with ordinary or extraordinary notice if the basis for the transaction is unexpectedly lost (clausa rebus sic stantibus). Furthermore, a change notice with the possibility of consent is possible. An amending notice of termination contained in the GTC offers the third possibility of adjustment, whereby there is little legal certainty if the variant is too narrow. Fourthly, a renegotiation of LIBOR-linked contracts is possible, whereby economic equivalence is sought.

The change also has a certain significance for enterprises and corporate clients. It leads to a decoupling of the interest rate commitment from the capital commitment, whereby in the case of SARON the capital commitment remains and the interest rate commitment no longer applies. Furthermore, the interest rate risk changes from periodic to daily and the interest rate can only be calculated at the end of the interest period.