We’re committed to making this transition as smooth and seamless as possible for you.
You’ve likely heard about the approaching end to LIBOR. And if you have a LIBOR-based loan, you may be wondering how you’ll be impacted. If you’re a Truist client, there’s nothing you need to do right now. Through every step of the transition, we’ll walk with you and keep you informed.
Below, you’ll find resources that will help you understand the transition and what it means for you. If you have any questions or concerns, contact your Truist relationship manager.
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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.
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.
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. 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 Reference Rate Committee (ARRC) to develop an alternative rate and to provide recommendations for the financial sectors on the transition away from LIBOR. Truist is actively participating in working groups and other offerings by ARRC.
Truist offers a variety of indexes, such as Secured Overnight Financing Rate (SOFR), Bloomberg Short-Term Bank Yield Index (BSBY), and Prime. We welcome the opportunity to discuss these alternatives with you.
To learn more about SOFR, refer to our SOFR FAQ (PDF).
To learn more about BSBY, refer to our BSBY FAQ (PDF).
Fallback language provides a methodology for the replacement of LIBOR when it’s discontinued. We’ve adopted fallback language based on ARRC recommendations. It provides for LIBOR to be replaced with SOFR-based rates and the appropriate Benchmark Replacement Adjustment. The Benchmark Replacement Adjustment is a static spread adjustment and will be based on the LIBOR tenor being replaced. The ARRC recommended adjustments are:
USD 1-week LIBOR
USD 1-month LIBOR
USD 2-month LIBOR
USD 3-month LIBOR
USD 6-month LIBOR
USD 1-year LIBOR
If you have questions about rate alternatives or how the phasing out of LIBOR will impact your Truist loans or derivatives transactions, contact your relationship manager.