From LIBOR to SOFR

LIBOR cessation

Effective December 31, 2021, 1-week and 2-month US dollar LIBOR (USD) rates ceased publication. While certain USD LIBOR tenors may continue to be published until June 2023 to facilitate the transition of legacy products, UBS has replaced its LIBOR-referencing product benchmarks with alternative reference rates for all new and many legacy products as of January 1, 2022. Please contact your Financial Advisor to discuss any questions on the LIBOR transition and how it affects your portfolio.

Information available on this site is provided for existing Global Wealth Management Americas clients with existing LIBOR-referencing positions or products only.

Quick links and resources

The London Interbank Offered Rate (LIBOR) is being phased out and replaced by the Secured Overnight Financing Rate (SOFR) for certain loans and investments.

What is LIBOR?

LIBOR is a widely used interest rate benchmark that the financial industry has used for many years to set interest payments for many mortgages and loans, as well as interest received from a variety investments.

Why is the industry moving to a new benchmark?

After the financial crisis in 2007/2008, the volume of transactions underlying LIBOR fell, and regulators across major international markets became concerned about the reliability of LIBOR. The move away from LIBOR comes after careful consideration among financial service industry participants and key regulators. Their goal is to provide a more reliable interest rate benchmark.

No new LIBOR-based loans or assets should be originated after the end of 2021. Existing loans and assets will be required to transition away from LIBOR prior to June 30, 2023, and many credit lines and loans will complete the transition by the end of 2021.

How you may be affected

The move away from LIBOR may affect interest paid on adjustable rate mortgages, other variable rate loans and credit lines, as well as investment interest received from futures, corporate bonds, derivatives and other financial vehicles.

How you may be affected will depend on your exposure to LIBOR. Your UBS Financial Advisor can tell you whether you have assets or liabilities at UBS that use LIBOR.

Check back for the latest information!

We’ll update this page regularly as regulators and the financial industry finalize details of the LIBOR transition.

Choosing a new benchmark

How was the new benchmark selected?

The Federal Reserve Board and the New York Fed convened the Alternative Reference Rate Committee (ARRC) to find a LIBOR replacement for the US. ARRC includes financial industry firms and banking and financial sector regulators. They identified the Secured Overnight Financing Rate (SOFR) as the preferred alternative benchmark.

Understanding SOFR

SOFR measures the cost for banks to borrow cash overnight from other banks. It is supported by Treasury securities and is based on an average of more than $1 trillion in daily transactions. This should make SOFR a more reliable benchmark going forward.

Depending on the specific loan or investment, LIBOR may be replaced with SOFR plus a spread, which is intended to minimize any change to all-in interest rates.

Note that some loans and investments may use a benchmark other than SOFR, including credit-sensitive indices like the Bloomberg Short-Term Bank Yield Index (BSBY) or Ameribor.

A closer look at loans

What will happen to LIBOR-based loans?

At UBS, adjustable rate mortgages (ARMs) and other variable-rate loan contracts include language that describes the conditions and process for a switch to an alternative benchmark.

Other LIBOR-based loans: For other UBS loans currently based on LIBOR, including securities backed loans, commercial real estate (CRE) loans and Community Reinvestment Act (CRA) loans, the move away from LIBOR have already taken place. This includes all new and most existing loans held by UBS Bank USA, UBS Financial Services Inc. or one of their affiliates. For those loans that have converted, future interest rate adjustments will no longer be calculated using LIBOR.
LIBOR-based ARMs: Existing LIBOR-based ARMs will migrate to the new benchmark. ARMs still in their initial fixed-rate period will not be impacted by the change until the date of the first rate adjustment, which may be several years in the future. Those already in their adjustable rate period will use the new benchmark beginning with the first adjustment after migration from LIBOR.

What you can do if you have a LIBOR-based loan

UBS will provide you with specific information if your loan is affected. In the meantime, if you have questions about your exposure to LIBOR and the potential impact of the transition to SOFR, please reach out to your UBS Financial Advisor.

A closer look at investments

Impacted investments

Investments will be impacted if they are tied to LIBOR or if LIBOR is used to determine the benchmark rate for that investment. This includes Cross Currency Swaps, Exchange Traded Derivatives, Securitization Instruments, Exchange Traded and Listed Funds, Public Finance and Preferred Stock, Fixed Income Instruments and Structured Products. Each issuer of impacted investments will determine the transition plan for their securities.

What will happen to LIBOR-based investment contracts?

The issuer’s prospectus, offering document or agreement should describe the investment’s benchmark rate and, if it is LIBOR, how a replacement rate may be determined.

What you can do before investing

Review the issuer’s materials carefully before purchasing investments that are LIBOR-related and discuss the potential risks with your UBS Financial Advisor.

The information contained herein reflects, as of September 2021, the views of UBS (or its applicable affiliate providing this publication) and sources believed by UBS to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein. The views expressed here may change at any time after the date of this publication. This material is for your information only and should not be relied upon as investment advice or the basis for making any investment decisions. It does not constitute an offer to sell or a solicitation of an offer to buy any specific product or service. UBS retains the right to change the range of services, the products and the prices at any time without prior notice. Certain services and products are subject to legal provisions and cannot therefore be offered worldwide on an unrestricted basis. UBS does not provide legal or tax advice and this does not constitute such advice. UBS strongly recommends that persons obtain appropriate independent legal, tax and other professional advice.

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Moving to a new interest rate benchmark