The Transition From LIBOR
Among the many headlines in financial news today is the approaching end to LIBOR. If you have a LIBOR-based loan, you may be wondering how you’ll be impacted. As a Truist client, there's nothing you need to do at this time. You can be assured that we’ll walk you through the transition and keep you informed every step of the way.
Below, we've compiled some resources that will help you understand the transition and what it means for you. If you have any questions or concerns, your Truist relationship manager is an excellent resource for information and is committed to making this transition as smooth and seamless as possible.
For more information, read our article about Moving on From LIBOR.
The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans. For decades, LIBOR has been used by financial institutions as a measure of its short-term cost of funds and has been a primary index for commercial lending.
Why is LIBOR going away?
Following the financial crisis of 2008, the ongoing viability of LIBOR came under question. Since that time, the transactions underlying the determination of LIBOR have continued to decline, creating doubt regarding its continued viability. In 2017, the Financial Conduct Authority (FCA), the regulator of LIBOR, announced its intention to discontinue the publication of LIBOR.
When is LIBOR going away?
On March 5, 2021, the FCA announced the final publication date of over 35 tenors of LIBOR. For USD LIBOR 1-week and 2-month tenors, December 31, 2021, is the final publication date. All the publication of all remaining USD LIBOR tenors, including popular 1-month and 3-month tenors, will stop immediately after June 30, 2023. In addition, regulatory guidance provides that in all cases, banks may no longer use LIBOR in new contracts after 2021 and has encouraged banks to discontinue use of LIBOR as soon as practicable.
In anticipation of the end of LIBOR, the Federal Reserve convened the Alternative Rate Reference Committee (ARRC) to develop an alternative rate and to provide recommendations for the financial sectors on the transition away from LIBOR. We’re actively participating in working groups and other offerings by ARRC.
What's Truist doing to prepare for the end of LIBOR?
We’re actively preparing for the end of LIBOR. We’re engaged with industry groups and the ARRC and monitoring in real-time developments in LIBOR transition. We’ve established a LIBOR transition team with representatives from all lines of business impacted by LIBOR transition and subject matter experts to manage the transition from LIBOR for the company and its clients. This team is diligently developing and implementing plans to update processes, systems, and documentation as appropriate.
While most loans include some form of fallback language that provides for the replacement of LIBOR should it become unavailable, we’ve updated our loan documentation to include current industry standard fallback language. We’re also reviewing existing documentation to determine if any further action is required. And, we’re expanding alternative reference rates available for clients to consider.
We understand that the end of LIBOR will impact our clients, and we’re focusing on keeping you first by providing communication and education to minimize any disruption this may cause. During the next several months, we’ll provide additional information through client communications, resources, and contact with relationship managers on LIBOR.
What reference rate index will replace LIBOR?
We’re carefully monitoring industry developments and alternative reference rates identified in the marketplace to best serve our clients. At this time, the ARRC has recommended the Secured Overnight Financing Rate (SOFR) as an alternative. This is an evolving process, and markets are continuing to develop plans regarding potential replacements for LIBOR. As alternative reference rates become available at Truist, we'll share this information with you.
To learn more about SOFR, refer to our SOFR FAQ (PDF).
The information provided is not intended to be legal, tax, or financial advice. BB&T hopes you find this information useful but we cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.
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