Making the transition away from LIBOR as a global benchmark interest rate
LIBOR will be replaced with rate alternatives, such as the Secured Overnight Financing Rate (SOFR) (Link opens in a new tab). Regulators have made clear LIBOR should not be used in new contracts after 2021. The transition may also impact some existing contracts that use LIBOR as a benchmark rate.
U.S. Bank has planned extensively for this transition in recent years, and we are well-positioned to facilitate a smooth transition for our customers. We offer a variety of rate alternatives and on April 1, 2021, we became operationally ready to offer SOFR for most commercial loans.
One of our top priorities is keeping you informed. We encourage you to review the information on this page, as well as the external resources provided. If you would like more information, contact your primary U.S. Bank point of contact or visit our customer service page to contact us by the method most convenient for you. We also encourage you to seek independent professional advice on any questions or concerns you may have on this transition.
The Adjustable Interest Rate (LIBOR) Act
U.S. Federal Legislative Solution for Transitioning “Tough” Legacy Contracts
On March 15, President Biden signed a congressional 2022 omnibus spending bill that included legislation to transition tough legacy LIBOR contracts in the U.S.
The Adjustable Interest Rate (LIBOR) Act establishes a process for replacing LIBOR with a clearly defined replacement benchmark in existing contracts that (a) do not have fallback language, (b) have fallback language that falls back to a rate that is based on LIBOR, or (c) require a party to determine a replacement rate that takes LIBOR into consideration. This replacement benchmark rate will be selected by the Board of Governors of the Federal Reserve System ("the Board") through a rule-making process by September 2022.
The selected rate is required to be a SOFR-based rate with a spread adjustment and may vary across products. It is expected that the Board will provide a comment period on the proposed rules before they become effective.