What is LIBOR?
The London Interbank Offer Rate – or LIBOR - is a financial benchmark used by banks to determine interest rates on a variety of products, including derivatives, mortgages, bonds, and corporate loans – including here at Pioneer.
However, federal and state regulatory agencies are mandating that financial institutions transition away from LIBOR as a market interest rate benchmark prior to the anticipated discontinuance of LIBOR as a published index at the end of 2021.
Why is LIBOR being replaced?
When LIBOR was established in 1969, transactions by select global banks provided enough data to set an accurate rate for current lending conditions. Today, however, due to a reduction in interbank lending, a much smaller number of transactions make up the data set, resulting in an interest rate that most likely does not reflect current short-term lending conditions.
Due to this shift, regulators in the UK have announced that publication of the LIBOR will cease in the near future.
What will replace LIBOR?
There are many alternative reference rates available, such as the Sterling Overnight Index Average (SONIA), Swiss Average Rate Overnight (SARON), Tokyo Overnight Average Rate (TONAR), and Secured Overnight Financing Rate (SOFR).
While a determination has not been finalized, the Alternative Reference Rates Committee (ARRC) has identified SOFR as the industry preferred alternative for replacing US Dollar LIBOR, as it has several characteristics that make it much safer and less vulnerable to manipulation than LIBOR.
How does this impact Pioneer and its customers?
Pioneer has assembled a LIBOR Transition team to identify the impact of this transition on internal operations, existing loan relationships, and future lending practices while developing solutions to product information and delivery.
Pioneer will be communicating directly with customers affected by the transition to notify them of the alternative rate once it is determined and update any loan documentation, as necessary, prior to the anticipated discontinuance of the rate.
This page will be updated with information related to the transition as it becomes available.
If you are a customer impacted by this transition, please contact your Relationship Manager, Branch Manager, or our Customer Care team at 518.730.3000 for additional information.