Move from LIBOR to SOFR
A Guide To Help Your Transition
We are dedicated to our clients and providing exceptional service
LIBOR Transition Background
Key dates in US for transition away from LIBOR
What can clients expect from Johnson Financial Group?
- LIBOR was a set of credit sensitive term interest rates at which large money center banks lend to each other for short-term loans.
- 1 month US LIBOR was used at Johnson Financial Group & the banking industry in most large variable rate commercial loans and customer facing interest rate swaps.
- The number & dollar amount of actual interbank transactions that LIBOR is based on is limited.
- This lack of transparency has led to charges of rate manipulation in the past.
- Effective 1/1/2022, US regulators require all new and renewed transactions (loans, swaps, etc.) to not include LIBOR based rates.
- Johnson Financial Group will use the 1-month CME Term SOFR rate as our primary replacement rate for LIBOR based commercial loans starting in December of 2021.
- Existing LIBOR based transactions have until 6/30/23 to transition to another index/rate.
- SOFR (Secured Overnight Funding Rate) is an overnight credit risk-free rate based on overnight repurchase (repo) transactions and is published by the New York Fed. The underlying transactions are deep, liquid and difficult to manipulate.
- CME Term SOFR is a recently approved forward looking set of term rates established by the Chicago Mercantile Exchange (CME).
- CME Term SOFR has similar conventions to LIBOR and will be operationally easier to implement vs. rates based on daily SOFR.