Corporate & Institutional
Global Capital Markets LIBOR Transition
Wilmington Trust has created a dedicated LIBOR Transition Office.
With a dedicated LIBOR Transition Office, Wilmington Trust is committing resources toward making the necessary investments in systems, personnel and processes required to develop client solutions. Understanding how this impacts Wilmington Trust clients with LIBOR-based transactions is important, and we are here to help you navigate your options.
We'll be sure to provide updates on the LIBOR transition from the Alternative Reference Rate Committee (ARRC), convened by the Federal Reserve Board and Federal Reserve Bank of New York, as well as guidance on its recommended alternative rates.
The information made publicly available via the resources referenced on this page are for informational purposes only, and should NOT be viewed or construed as legal, accounting, tax or other professional advice. Readers should consult with their own professional advisors to discuss any information provided herein. Wilmington Trust is not endorsing any third-party sources cited herein and makes no representations or warranties about the accuracy or completeness of any information contained herein.
If you have questions, contact your Wilmington Trust Relationship Manager.
What is LIBOR?
The London Interbank Offered Rate (LIBOR) is intended to represent the average interest rate at which a certain group of contributing global banks can obtain funding in the London interbank market. For decades, LIBOR has been and continues to be the primary global short-term interest rate benchmark. US Dollar LIBOR is used by Wilmington Trust and other financial institutions as a measure of its short-term cost of funds.
Why Is LIBOR Going Away?
Global money markets were disrupted and fundamentally changed following the Great Recession, which began with the 2007 U.S. housing market downturn and prompted the Federal Reserve Bank and other central banks to intervene. Consequently, the number of interbank funding transactions in the LIBOR market declined, and the basis for determining the LIBOR rate was and remains to be increasingly based on “expert judgment” rather than actual transactions. In addition, several large global banks involved with providing data used to set LIBOR have been accused of manipulating LIBOR during the same time-period. These issues have led bank regulators to begin looking for a replacement for LIBOR.
When Is LIBOR Going Away?
- The UK Financial Conduct Authority (“FCA”, the regulator of LIBOR) and the ICE Benchmark Administration (“IBA”, the administrator of LIBOR) announced on March 5, 2021 that the IBA will cease publication of USD LIBOR for the overnight, 1-month, 3-month, 6-month, and 12-month tenors immediately following the IBA publication thereof on June 30, 2023; and cease publication of the 1-week and 2-month USD LIBOR tenors following the publication thereof on December 31, 2021. The respective announcements by the FCA and the IBA, along with a statement issued by the Alternative Reference Rates Committee (ARRC), are linked here for your convenience.
- Notwithstanding the continued publication of certain commonly-utilized tenors of USD LIBOR through June 30, 2023, U.S. regulatory agencies (including the Federal Reserve Board, M&T Bank’s regulator, the parent company of Wilmington Trust) have issued guidance encouraging banks to cease entering into new loan agreements using US LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. M&T Bank does not anticipate making any US LIBOR loans after the end of 2021 and is currently offering non-LIBOR pricing.
How is Wilmington Trust preparing for LIBOR cessation?
Wilmington Trust, like most other market participants that uses LIBOR, is in a “wait-and-see” mode as we carefully monitor industry developments. When the LIBOR rate becomes unavailable or indeterminable, Wilmington Trust’s standard documentation generally provides for the conversion of the interest rate to different rate. As the market comes to a consensus about replacement rates we will continue to have more meaningful discussions about transitioning the interest rate on a particular transaction and amending governing documents in a manner that meets both Wilmington Trust’s and the customer’s needs.
These services are provided by Wilmington Trust, N.A.
Additional Resources Regarding LIBOR Transition
As one of the world’s more important benchmark rates, financial markets, regulators, legislators and consumers must prepare immediately for LIBOR’s discontinuance.
The LIBOR Act is another significant milestone for financial market participants as they adapt to the end of LIBOR. Market participants should analyze their LIBOR-based agreements with these top five items in this article.