Transition from IBORs in the loan market

LIBOR Transition

LIBOR is an interest rate benchmark which is being phased out. From 1 January 2022, publication of most LIBOR settings ended. Five USD LIBOR settings are available until end-June 2023 although no new loan facilities should be using USD LIBOR. Work is progressing on the transition of legacy LIBOR facilities to alternative near risk-free rates in USD and other currencies. The LMA is working with the market, other trade associations and the regulators on the transition.

Countdown to cessation of remaining US dollar LIBOR panels

(overnight, 1-month, 3-month, 6-month & 12-month US dollar LIBOR)

Latest News

One month to go until US dollar LIBOR cessation: FCA and US ARRC issue final announcements before the important end-June 2023 deadline

On 31 May 2023, the UK Financial Conduct Authority (the FCA) and the US Alternative Reference Rates Committee (the ARRC) published final announcements, reminding market participants of the impending US dollar LIBOR cessation at the end of June and the need to transition away from LIBOR as soon as possible. The FCA also published a Feedback Statement related to its November 2022 consultation on USD LIBOR.

The ARRC, the FCA and other authorities worldwide have long emphasised the need for an orderly transition away from LIBOR. The FCA reiterates that synthetic LIBOR remains only a temporary solution to allow more time to complete transition efforts. By now, firms should be fully aware of, and prepared for, the approaching end-June deadline. Those that are not prepared risk uncertain and potentially unfavourable outcomes with respect to their legacy contracts along with operational risks. Therefore, firms must continue to actively transition LIBOR-referencing contracts to appropriate and robust reference rates, with the FCA expecting firms to deliver demonstrable progress.

LMA updates exposure draft term SOFR documentation to recommended form

On 25 May 2023, the LMA published its exposure draft term SOFR documentation as recommended form. The related term SOFR commentary has also been updated. 

The move to recommended form follows the increasing use in the market of the term SOFR provisions in the exposure drafts, market feedback received, the length of time since publication of the exposure drafts and the impending end-June 2023 deadline for US dollar LIBOR transition. Note that, as with all LMA recommended forms, these are non-binding and parties are free to depart from their terms.

In respect of fallbacks to term SOFR, the options presented remain suggestions only given some ongoing discussions in the market. However, market participants are reminded of recent regulatory statements, including from the Financial Stability Board, that contracts referencing term RFRs need to have robust fallbacks in place. Market participants are also reminded that cost of funds is only included in the recommended form term SOFR documentation as a potential option for an ultimate fallback. Cost of funds is not designed to be used as a primary fallback given that it is not a robust, scalable or workable long-term fallback.    

LMA releases three new RFR e-learning modules on compounded rates

We are pleased to have published three new modules within our 'Transition to RFRs' e-learning course. 

The new modules (building upon two prior modules released in August 2022) introduce Compounded Risk-Free Rates (RFRs) and the practical implications for calculating loan facilities' interest. The additional modules include: 

Compounded RFRs - The Basics: this module provides a high level overview of Compounded RFRs, introducing the basic principles and building blocks that underpin Compounded RFRs. 

Compounded RFRs - Observation Shift: this module explains Compounded RFRs in further detail, highlighting the difference between loan facilities with and without an Observation Shift using worked examples. 

Compounded RFRs - CCR & NCCR: this module introduces, with worked examples, the concepts of Cumulative Compounded Rate (CCR) and Non-cumulative Compounded Rate (NCCR). 

Please note that these modules are intended to be completed in the order noted above and steadily build upon the principles and building blocks introduced in prior modules. 

Video Content

LMA Webinar On Demand - Transition from IBORs in the loan market: Where are we now? May 2023


LMA Webinar On Demand - Transition from IBORs in the loan market: Where are we now? November 2022


LMA webinar update on the transition from LIBOR in the loan market and the LMA's term SOFR document


The ECA view on LIBOR transition

Hosted by Kam Mahil – LMA


LIBOR discontinuance and its potential impact on developing markets

This webinar includes a 20-minute presentation followed by a 20-minute Q&A session.


View all our other LIBOR content on LMA Player