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Transition from LIBOR

Changes affecting industrywide use of common interest rate benchmarks are on the horizon.

Contact Our LIBOR Transition Team

Reach out to our Libor Transition team with any questions about how the transition may impact you or your company.

Preparing for LIBOR Transition: Derivatives Implications

Listen to Northern Trust experts as they discuss the implications of the LIBOR transition on derivatives transactions, including the upcoming timeline and how Northern Trust can work with clients to prepare for the transition.

Here’s what you need to know about the upcoming changes – and how Northern Trust is preparing.

Here's What's Happening

Many financial markets have relied for decades on Interbank Offered Rates (IBORs), benchmark interest rates intended to represent the cost of short-​term, unsecured, wholesale borrowing by large globally active banks, as a basis for a variety of financial transactions and decisions. Until year-end 2021, the London Interbank Offered Rate (LIBOR), the most widely used interest rate benchmark, was reported daily in five currencies and seven tenors and used as a reference rate for an estimated $350 trillion in financial instruments.

Since 2008, the notional amount of interbank lending based on LIBOR has declined for many reasons. This and other factors contributed to a push by global regulators to phase out LIBOR.

In July 2017, the U.K. Financial Conduct Authority announced it would no longer compel the panel banks that support LIBOR to continue their submissions beyond 2021. Regulators worldwide encouraged market participants and financial institutions to replace existing IBOR rates with alternative reference rates (ARRs) or other benchmark rates.

On March 5, 2021, the administrator for LIBOR published the results of a consultation, stating that one-week and two-month USD LIBOR, as well as GBP, EUR, CHF and JPY LIBOR settings, would no longer be published after December 31, 2021. As planned, the cessation of these currencies and tenors was executed at year-end 2021. All other USD LIBOR tenors are expected to remain available until final publication on June 30, 2023.

What is Northern Trust Doing?

Northern Trust established an enterprise-wide LIBOR Transition Program in 2018 to coordinate its LIBOR and IBOR transition efforts. This program, comprised of subject matter experts from across the organization, developed a multi-year plan, driven by client- and product-focused work streams, to manage the transition from the IBORs to ARRs or other benchmark rates.

By year-end 2021, Northern Trust transitioned away from offering LIBOR for any new agreements. Northern Trust also enhanced dozens of systems to enable the use of the alternative reference rates recommended by the respective National Working Groups (NWGs), which are comprised of regulatory authorities and market participants around the globe to facilitate the transition.

As a result, Northern Trust can manage and support products and services using alternative rates, including, but not limited to, Secured overnight financing rate (SOFR), Reformed Sterling overnight index average (SONIA), Euro short-term rate (€STR), Swiss average rate overnight (SARON), and Tokyo overnight average rate (TONAR). 

Although a key goal of the NWGs is to minimize the potential for unintended value transfer during the move from IBORs to ARRs, these ARRs are different than LIBOR and should not be considered one-for-one replacements. For example, ARRs are backward looking, overnight rates with different calculation methodologies, and some are secured, unlike LIBOR which is an unsecured rate. The NWGs’ efforts have been aimed at addressing the differences between LIBOR and ARRs to facilitate a smooth transition, including the development of spread adjustments aimed at achieving equivalency between LIBOR and the proposed ARRs at the time of transition.

On June 4, 2019, the Financial Stability Board published Overnight Risk-Free Rates A User’s Guide. The publication provides an overview of the ARRs and a discussion of the various options to use. 

What Should I Be Doing?

It is important that market participants with LIBOR exposure stay informed and prepare for the full transition by following the developments of the NWGs. Each of the NWGs has published materials designed to inform market participants about the transition from LIBOR to ARRs. For example, the Alternative Reference Rates Committee (ARRC) has published materials to inform market participants about the transition from US dollar LIBOR to SOFR, including the “paced transition plan”, which intends to encourage the industry adoption of SOFR, and A User’s Guide to SOFR, which is intended to help explain how market participants can use SOFR in cash products. The Working Group on Sterling Risk-Free Reference Rates also has published the Bank of England’s fact sheet to inform market participants about the transition from LIBOR to SONIA, the preferred ARR for sterling LIBOR.

Northern Trust continues to assess client impacts and change requirements, and will notify clients in a timely manner if action is required to address the LIBOR transition in our products and services.

For more information, please contact your relationship manager or email

Industry Resources

The information in these materials is not intended to be and should not be treated as legal, investment, accounting or tax advice. Readers, including professionals, should not rely upon this information as a substitute for their own research or impact assessment or for obtaining specific legal, accounting or tax advice from their own counsel.