1. Why does  LIBOR discontinue?

On 05 March 2021, the Financial Conduct Authority (FCA), which is a financial regulatory body in the United Kingdom,  confirmed that LIBOR (the London Interbank Offered Rate), once the most influential benchmark, will cease to be provided and no longer be published.

LIBOR, which is widely used by banks in Georgia and globally for calculating interest rates, will be replace by a new benchmark, Term SOFR (The Secured Overnight Financing Rate). Term SOFR is credited with a higher level of transparency and liquidity, higher compliance with regulatory and market requirements and the focus on consumers' best interests. 

2. Which LIBOR rates will cease and when?

On 05 March 2021, the Financial Conduct Authority (FCA) confirmed the dates on which the following LIBOR settings will cease to be published:

• Immediately after 31 December 2021: all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings;
• Immediately after 30 June 2023: 1, 3, 6 and 12-month US dollar settings.

3. Why is LIBOR being replaced and where can I find more information about the end of LIBOR?

As interbank offered rates (IBORs) are crucial for many financial contracts, they should be strong, reliable and focused on consumers' best interests.

The Financial Stability Board (FSB) made recommendations for the global financial system to reform  IBORs and transition to an alternative benchmark that would best fit the current financial environment and have a higher level of liquidity and transparency. To ensure the strength and reliability of IBORs, international market players and European regulators have come up with new terms and criteria.

Detailed information about changes in LIBOR, and IBOR in general, is available on the following websites:

• FSB recrecommendations regarding the reformation of LIBOR: Reforming Major Interest Rate Benchmarks
• FCA announcement on the end of LIBOR (05 March 2021).
• ICE Benchmark Administration on LIBOR.
• Alternative Reference Rates Committee (ARRC) on transition from LIBOR
• European Central Bank  (ECB)'s working group on euro risk-free rates

4. What is Term SOFR?

Term SOFR/ the Secured Overnight Financing Rate – a benchmark interest rate administered by CME Group Benchmark Administration ltd, authorized by the UK Financial Conduct Authority (FCA)).

Leading financial institutions transition from LIBOR to Term SOFR.

The New York Federal Reserve  calculates and publishes SOFR daily on the New York Fed website. SOFR complies with BMR (Benchmarks Regulation) guidelines and is approved by the Alternative Reference Rates Committee (ARRC). 

5. Where can I find information about Term SOFR?

The information about Term SOFR is available on this website.

6. How often does Term SOFR change?

Term SOFR is updated each business day. However, the Bank will use 6-month Term SOFR, which means that the interest rate on loans will be adjusted to the new SOFR rate every 6 (six) months (as in the case of USD LIBOR).

7. Will the transition affect the interest rate on my loan?

The total interest rate on your loan will remain the same during the transition from LIBOR to Term SOFR (01 July 2023).

As LIBOR and Term SOFR use different methodologies, the Alternative Reference Rates Committee (ARRC) recommends that a credit spread adjustment be added to SOFR to compensate for the difference between the two rates.  The adjustment will ensure that the total value of the interest rate on your loan is not increased or decreased during the transition.