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Q&A- THE LIBOR RERORM

Questions and answers about the LIBOR reform

Transitioning from LIBOR

The Financial Conduct Authority (FCA) announced in March 2021 that GBP, EUR, CHF and JPY LIBOR will cease after the end of 2021 and that the USD LIBOR will cease after June 2023. 

 

Why is LIBOR ceasing?
International regulators have been looking at reforming IBORs following the 2008 credit markets seizure.  Since then, the number of interbank unsecured borrowing transactions has been steadily decreasing.  As such, there has been a growing reliance on the expert judgement of panel banks on which to base LIBOR.  This has led to concerns that LIBOR is no longer representative or a reliable benchmark reference rate.

 

What will replace IBORs?
Regulators have been promoting the development and adoption of RFRs, which are overnight rates.  Working groups have been established across all major currencies to designate alternative overnight rates, such as, but not limited to the following:
SONIA (GBP)
SOFR (USD)
ESTR/EURIBOR (EUR)
SARON (CHF)
TONA (JPY)

 

What does this mean for Leumi customers?
Accordance with the Bank of Israel and the global regulation, Leumi will no longer offer new products referenced to LIBOR after 31.12.2021.
Customers with lending agreements referenced to LIBOR can expect to receive Legal Addendums, to enable a switch from LIBOR to an alternative rate.
The conversion mechanism set by the bank is compatible with conventional conventions in the world and is uniform for all customers, fair and transparent.
If the customer doesn't want to implement the conversion mechanism set by the bank, he can repay the loan in early repayment. In this case he must appeal to his personal bankers for receiving information on the process and it's costs (if there are any).