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LIBOR Transition: What’s Happening and What You Need to Know

London Interbank Offered Rate (LIBOR) is a rate at which banks can borrow from other banks and is an indicator of the cost of unsecured borrowing in the interbank markets. For decades, many financial contracts have referenced LIBOR to determine the amount of interest a borrower will pay. Each day, the Intercontinental Exchange asks the panel of banks how much they would charge other banks for short-term loans. From that, the daily LIBOR rate is determined.

Due to questions around its validity as a benchmark rate, it is being phased out completely over the next two years.

Why is LIBOR going away?

One of the primary criticisms of LIBOR is that it is increasingly based on estimates submitted by panel banks, which has led to a lack of transparency and volatility, and may make it a less representative rate as time passes. Many industry participants recognize the need for a reference rate that reflects market level interest rates and is rooted in actual trading activity.

When is the transition happening?

As of December 31, 2021, panel banks will no longer be required to submit LIBOR data. LIBOR one-week and two-month USD LIBOR rates will no longer be published after December 31, 2021. All other tenors will cease publication on June 30, 2023.

Key LIBOR Cessation Timeline

March 5, 2021
  • The IBA and FCA announced that LIBOR's publication is officially coming to an end
  • LIBOR fallback spread adjustments set, but LIBOR transition is not required
June 30, 2021
  • ARRC recommended date for ceasing LIBOR-based contracts
December 31, 2021
  • Non-US LIBOR settings to cease and non-USD LIBOR contracts to transition to replacement rates
  • 1 week and 2 month USD LIBOR settings will cease
  • Banking Agencies require USD LIBOR to no longer be used for new contracts
June 30, 2023
  • Remaining USD LIBOR settings cease and outstanding legacy contracts to transition to replacement rates

How is Columbia Bank preparing for this transition?

In 2019, Columbia Bank established a LIBOR Transition Working Group to plan for the phasing out of LIBOR. The Working Group is an enterprise-wide group across different areas, business lines, and geographical locations. This team is responsible for the overall project scope, timeline and execution of a smooth transition.

For an alternative rate, SOFR – the Secured Overnight Financing Rate – is being considered as an alternative to the USD LIBOR. In addition to SOFR, Columbia Bank continues to evaluate other indexes as alternatives to LIBOR including Ameribor, and Bloomberg Short Term Bank Yield (BSBY).

Learn more about SOFR.

Which Columbia Bank products are affected?

Any floating-rate product currently referencing LIBOR is affected, including: Commercial loans, Commercial Real Estate loans, and Single-Family ARMs. The LIBOR Transition Working Group is evaluating each product and taking steps to ensure a smooth transition from LIBOR for our clients.

What is “fallback language” in the context of benchmark rate reform?

Fallback language is contractual provisions that specify the trigger events for a transition to a replacement rate, what the new rate will be, and the spread adjustment to align the replacement rate with the benchmark being replaced – in this case, USD LIBOR.

As loans mature, new contracts will include fallback language and after December 31, 2021, they will need to be transitioned to a new index to address the cessation of LIBOR.

Who can I contact if I have specific questions?

Please contact your banker for more details.

Additional Resources



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