LIBOR is an interest rate based on the rates at which banks lend to each other. LIBOR is one of the main interest rate benchmarks used in financial markets. It determines interest rates for financial contracts around the world, worth trillions of pounds.
LIBOR is commonly referenced in both financial contracts, such as loans or deposit facilities, and non-financial contracts such as commercial leasing contracts and the discount rate for valuations.
Firms need to transition away from using LIBOR because most LIBOR settings will cease to be published at the end of 2021 – find out more in this joint statement by the Bank of England and Financial Conduct Authority. Since the global financial crisis in 2008-09, activity in the markets that LIBOR measures has reduced. The low volume of underlying transactions means that LIBOR is no longer sustainable.
There are other more robust rates, including the Sterling Overnight Index Average (SONIA) benchmark, which the Bank of England produces.
It is important that your firm is ready to move its LIBOR-referencing contracts to alternative rates (like SONIA) in time.
Market participants are working with the Bank of England and Financial Conduct Authority to support this transition by the end of 2021.
The Working Group on Sterling Risk-Free Reference Rates leads this work in sterling markets, with support from the Bank of England and the Financial Conduct Authority.
It has held a number of webinars, and publishes guidance and support for both financial and non-financial firms to help them with the transition.
You can also read the Working Group’s priorities and roadmap for transition by end-2021 Opens in a new window Opens in a new window Opens in a new window.
These resources provide further information on the transition from LIBOR and set out why you need to act now to minimise disruption at the end of 2021.
You can keep up to date by signing up for the Working Group’s monthly newsletter and following its LinkedIn page Opens in a new window.
Introduction to LIBOR transition video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (July 2020)
Why do I need to transition away from LIBOR? video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (July 2020)
What is SONIA? video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (September 2020)
What is SONIA compounded in arrears and term SONIA? video Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (October 2020)
What is a Credit Adjustment spread? video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (September 2020)
Legal and documentation aspects video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (September 2020)
What it means for your lending agreements video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (September 2020)
The Impact of Transition on Accounting Opens in a new window and supporting slides (December 2020)
Recommended next steps for transition video Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window and supporting slides Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window (September 2020)
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