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Matt Townsend 5 min read

The Last Days of LIBOR, Cause for Celebration?

The idea of the much-anticipated farewell to LIBOR, the reference rate synonymous with backroom agreements and misdeeds for over half a century, is now a reality. This iconic benchmark, which once supported an astronomical sum of assets worldwide, will soon vanish into the annals of financial history.

On an unassuming Friday morning in June, at 11:55 am U.K. time, 6:55 am in New York, the final fixing of USD LIBOR took place. This a rather humble conclusion for a rate that once significantly influenced the markets and affected people's lives worldwide.

This quiet end has not come without challenges for banks, corporates and consumers alike. Some of the challenges our customers and banks face worldwide are described below.


  • Adoption of Risk-Free Reference Rates (RFRs):
    To replace LIBOR, banks adopted alternative reference rates, such as the Secured Overnight Financing Rate (SOFR), based on transactions in the U.S. Treasury repurchase market. [You can find out more about the new RFRs in my ‘Do you know your SOFR from your SARON’ blog] This change has resulted in changes to the fundamental nature of financial contracts and loan agreements worldwide, affecting various products, including derivatives, loans, and mortgages.

  • Operational Challenges
    The shift to new risk-free reference rates required significant operational change within banks. Their front/middle and back-office systems needed to be updated, new/updated contracts & agreements to be signed by clients, new risk models explained, and procedures updated to accommodate the new RFR rates. These tasks are complex and/or resource-intensive processes and, in many cases, are still ongoing.

  • Financial Reporting Changes:
    Banks had to adjust their financial reporting to reflect the new reference rates. This change impacted how banks disclosed interest rates, revenue, and expenses related to financial instruments linked to LIBOR.

  • Risk Management:
    The transition introduced new risks and challenges for banks. Different reference rates may behave differently under similar market conditions, leading to potential mismatches in risk management strategies and, for a time, enhanced engagement from risk committees.

  • Legal and Contractual Issues:
    The move away from LIBOR caused legal and contractual challenges. Banks needed to either renegotiate contracts with clients, counterparties, and borrowers or close out old contracts and enter into new ones. Ensuring all terms & conditions were updated to align with the new reference rates.

  • Consumer Impact:
    For customers, corporates & counterparties with variable-rate loan products, such as adjustable-rate mortgages and student loans, the transition will result in changes to their interest rates and monthly payments. These changes would need to be explained to and understood by the consumers before the change.


The full impact of the transition varies from one bank to another based on their size, business model, and exposure to LIBOR-linked products. Larger banks may have had a larger volume of contracts to deal with. In contrast, specialist banks serving specific sectors with highly structured finance will have more complex issues to attend to. Ultimately, all banks have faced a significant challenge and will again when the 3-month synthetic GBP LIBOR ends in 2024.

Not only has the demise of LIBOR triggered activity for banks, customers and corporations but for software vendors too. Financial software has had to be enhanced to support the new RFR rates and calculations. Siena Treasury, our Treasury Management Software, supports multiple methods of calculating RFR rates and some alternative interpretations of those methods.

While the discontinuation of LIBOR and its replacement has been widely covered in financial news and industry circles, the public is unlikely to be fully aware of these changes. And I think it's fair to say that outside the banking world, in the press, we will see headlines from time to time mistakenly referencing 'LIBOR' when referring to floating rate products. LIBOR became synonymous with any floating rates, in the same way, Hoover became synonymous with vacuum cleaners.

Despite the commotion, angst and ongoing effort to sunset LIBOR, it is important to acknowledge its significant role in shaping the global financial landscape. Its presence was felt in every corner of the market, touching retail investments, corporate assets, and even the wealth banking sector. Its influence was undeniable, even if its reputation became tarnished over time.

So, finally, LIBOR, while there is no cause for celebration at your departure, we bid you a fond farewell and request you remember to run the ‘Hoover’ around before you leave.