Life after LIBOR: Your guide to rate alternatives


Truist is actively working with clients to review LIBOR-based loans and emerging alternatives, including SOFR and BSBY, for a smooth transition to a new reference rate.

After years of hearing that LIBOR (London Interbank Offered Rate) cessation is coming, the final publication of USD LIBOR is set for June 30, 2023. To encourage a timely transition from LIBOR, regulatory guidance has directed that financial institutions no longer enter into new LIBOR contracts and that they work with impacted borrowers to address fallback language in existing LIBOR contracts.

With these guardrails firmly in place, what now? Like many, you may have questions about how LIBOR cessation impacts your existing LIBOR loans or future financing needs. At Truist, we have been actively engaged in planning for a post-LIBOR world. We are working with clients on their existing loans, and we have alternative indexes available for current and future financial needs. Let us help you plan and prepare for the next step in this journey.

Preparing for transition

In accordance with regulatory directives, loans maturing after LIBOR cessation must transition to a different index; however, you can manage the timing of that transition.

You may be ready to put LIBOR behind you and move to an alternative index now. Making this choice will allow you to select a new reference rate and migrate from LIBOR sooner than the final publication date.

Alternatively, you may choose to wait until LIBOR cessation to transition your loan to the new reference rate, in accordance with the fallback language contained in your loan documents.

At Truist, we believe it is important to make sure loans relying on fallback language have current language to address LIBOR cessation. Therefore, we are reviewing existing LIBOR loans and will proactively contact clients that do not have current fallback language to discuss an amendment that addresses LIBOR cessation.

For loans maturing between now and LIBOR cessation, you will select an alternative index as part of the renewal process (subject to credit approval). Once that occurs, you can rest assured LIBOR cessation will not impact your loan. 

What alternative rates are available?

Now that LIBOR is no longer available as a rate selection, we encourage you to become familiar with the alternative reference rates available in the market so you can determine which will meet your financial needs. Truist has followed developments in the market, and we’re making a number of the leading alternatives available to clients. Among them are SOFR (Secured Overnight Financing Rate) and BSBY (Bloomberg Short-Term Bank Yield Index).

SOFR (Secured Overnight Financing Rate)

As the recommended alternative to LIBOR endorsed by the Alternative Reference Rates Committee (ARRC), SOFR has become a leading alternative in the market. Published by the Federal Reserve Bank of New York (FRBNY), SOFR is based upon a broad measure of the cost of borrowing cash overnight, collateralized by Treasury securities.1

In addition to Daily SOFR, the FRBNY also publishes three compounded averages of SOFR—Average SOFR—with tenors of 30-, 90-, and 180-calendar days based upon the average of SOFR over the preceding period.2 Both Daily and Average SOFR are backward looking, based upon actual transactions in the market.

In an effort to meet the market need for a forward-looking term rate, ARRC has endorsed Term SOFR, published by CME Group. Term SOFR is a forward-looking rate based on transactions in the large SOFR derivatives markets. It reflects market expectations as to what will happen to interest rates in the future. CME Group publishes Term SOFR in 1-, 3-, 6-, and 12-month tenors.

Truist offers all forms of SOFR: Daily SOFR (simple interest and compounded interest in arrears), Average SOFR, and Term SOFR. The diversity of SOFR provides options for clients to choose from a rate that will fluctuate daily, such as Daily SOFR, or a rate that is set for a period based upon the applicable tenor, such as Term SOFR.

Please visit our SOFR FAQ for additional information.

BSBY (Bloomberg Short-Term Bank Yield Index)

The market has also identified the need for a credit-sensitive rate more akin to LIBOR, which reacts to market activities.

BSBY, which is published by Bloomberg Index Services Limited, is an unsecured, forward-looking borrowing rate based on the average yields at which large global banks access USD unsecured wholesale funding.3 Bloomberg publishes Overnight BSBY, providing a rate that fluctuates daily, and Term BSBY in 1-, 3-, 6-, and 12-month tenors.

Truist offers all forms of BSBY.

Please visit our BSBY FAQ for additional information. 

At a glance: Alternative rate offerings at Truist

For your convenience, we have provided a quick reference table of our offerings below.
Index Terms (tenors) Interest rate structure Publisher Truist Securities hedge capabilities
Term SOFR 1, 3, and 6 month Set in advance at commencement of the interest period CME Group Yes
Average SOFR 30 and 90 day Set in advance at commencement of the interest period Federal Reserve Bank of New York No
Daily SOFR Overnight Changes as the index changes Federal Reserve Bank of New York No
BSBY 1, 3, 6, 12 month, and Overnight 1, 3, 6 and 12 month: Set in advance at commencement of the interest period

Overnight: Changes as the index changes
Bloomberg Index Services Limited Yes

What happens next?

LIBOR cessation will be here soon, and your trusted advisors at Truist can address any questions regarding the transition to a new reference rate. Consider your alternatives and which best fits your need. We will contact you if any specific action is required. If you decide you want to transition your LIBOR loans to a rate alternative now, please let your relationship manager know. We stand ready to discuss the specifics of your situation and are always here to assist you.