Understanding the LIBOR Transition

The UK’s Financial Conduct Authority (FCA) will cease to publish the London Interbank Offered Rate (LIBOR) on June 30, 2023. Citizens Business Bank has certain variable-rate loan products that contain the LIBOR index. Since January 1, 2022 we no longer offer LIBOR as an option and have replaced the rate index with alternatives that have been deemed acceptable by the Alternative Reference Rate Committee convened by the Federal Reserve, which includes the Term SOFR and Bloomberg Short Term Bank Yield (BSBY) rate indexes.

Why is LIBOR being phased out?

While LIBOR has long been an established benchmark for determining interest rates, recent events have ruined its credibility as a reliable global benchmark. The global financial crisis also proved that LIBOR could be an unpredictable and volatile measure of market rates. That has caused regulators globally to actively require that financial institutions stop using LIBOR and move to an approved replacement rate index.

How is Citizens Business Bank preparing for the LIBOR transition?

Citizens Business Bank has had a team in place working on this transition to ensure a smooth experience for our affected clients. For existing LIBOR-based loans and associated underlying derivative contracts maturing beyond June 2023 that do not contain adequate provisions addressing LIBOR cessation, we will contact clients with advance notice to add or amend those provisions to move them to an approved replacement rate index.

How will the transition from LIBOR impact my loan?

Due to the anticipated discontinuation of LIBOR, loans originated or modified in the past few years have included fallback language that amends the loan documents to incorporate a new reference rate index to replace LIBOR, as well as a spread and other adjustments to account for differences between LIBOR and the new reference rate index.

For existing LIBOR-based loans maturing beyond June 2023 that do not contain provisions addressing LIBOR cessation, Citizens Business Bank will contact clients to add or amend those provisions to move them to an approved replacement rate index.

How will the transition from LIBOR impact my swap arrangement?

Citizens Business Bank is able to offer swap fallback provisions for a replacement rate index with spread adjustment that should maintain a reasonable degree of alignment between a client’s swap and existing loan.


Our team will continue to follow industry news and regulatory developments relating to the potential impact of the LIBOR transition on our Bank and our customers. In addition, we recommend that you review the impact of the LIBOR transition on your business and any lending or swap arrangements in discussions with your own professional advisors, including your tax and accounting advisors.

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