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2021 LIBOR Transition


Butterfield, like the rest of the global financial industry, is preparing to transition away from a key benchmark interest rate – the London Interbank Offered Rate, or LIBOR – to new alternative reference rates. Regulators have called for a transition period expected during 2021, allowing time for Butterfield to engage with clients who have credit / loan agreements that incorporate adjustable interest rates and LIBOR referenced as a benchmark.

The global LIBOR transition is an evolving process, but Butterfield’s immediate response was to create awareness, and then to ensure a smooth transition for clients. Butterfield has been orderly transitioning customers to alternate reference rates and these actions will continue for the remainder of transition period. Credit agreements are being reviewed to determine any requirement for amended contract language to incorporate a replacement rate.

Butterfield is proactively contacting clients during the transition period to discuss the relevant approach. Importantly, we will be guided by global regulatory standards in order to ensure customer consistency and fairness with the approach adopted.

Butterfield also no longer issues any new Credit Agreements that use LIBOR as a sole reference interest rate.

Clients who have questions regarding the LIBOR transition or Credit Agreements should contact their Relationship Manager or the Client Services Team for assistance.

Frequently Asked Questions


What is LIBOR?

LIBOR is an interest rate benchmark which is intended to reflect the average rate at which banks can obtain unsecured funding in the London Interbank Market for various currencies (US Dollar, European Euro, British Pound Sterling, Japanese Yen, and Swiss Franc) and seven different maturities (overnight/spot, one week, and one, two, three, six, and twelve months).

Where are LIBOR rates used?

LIBOR is used as a reference interest rate in relation to various financial instruments, including bilateral and syndicated loans, mortgages, bonds, derivatives, and other financial instruments.

What is the catalyst for LIBOR transition?

Regulators have determined that LIBOR reflects a market that is no longer relevant and at present the daily LIBOR does not reflect substantive underlying market transactions.

What are the transition dates?

The publication of (i) the overnight and 1, 3, 6 and 12 months USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023 will cease and (ii) all other LIBOR settings (Sterling, Euro, Swiss Franc and Japanese Yen, and 1 week and 2 months USD LIBOR) immediately following the LIBOR publication on Friday, December 31, 2021 will cease.

What are the LIBOR alternative reference rates?

Global regulators have established various committees which have now recommended the adoption of successor LIBOR alternative reference rates including the following:


Country

LIBOR

Alternative rate

Discontinuation Date

U.S.A.

USD LIBOR

SOFR (Secured Overnight Financing Rate)

Jan 2022 and June 2023

UK

GBP LIBOR

SONIA (Sterling Overnight Interbank Average Rate)

Jan 2022

Europe

EUR LIBOR

€STR (Euro Short Term Rate)

Jan 2022



Where can I find additional information?

For more about the global transition, these additional resources may be useful:

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