Federal Reserve System

On July 27, 2017, the United Kingdom Financial Conduct Authority announced, without specifying a replacement, that it would phase-out the London Interbank Offer Rate (LIBOR) by the end of 2021. LIBOR, a rate measured by short-term borrowing among large banks, has for decades been the reference rate underlying trillions of dollars’ worth of global financial transactions. In real estate, LIBOR is common among floating rate loans, where interest on loan proceeds often accrues at LIBOR plus a spread. However, volatility during the 2007-08 financial crisis, manipulation scandals, and a scarcity of transactions on which LIBOR is based have hurt LIBOR’s relevance, hence the need for a replacement.

Continue Reading LIBOR Phase Out: Important Considerations for Negotiating Loan Documents