The LIBOR interbank interest rate benchmark will be replaced by EURIBOR
We would like to inform you about changes related to the cancellation of the LIBOR interbank interest rate benchmark. Pursuant to the European Union regulation, in the beginning of 2022, the LIBOR (in EUR) in loan agreements will be replaced by the EURIBOR index. Clients who have concluded such agreements will not be required to take any further actions: we will personally inform the clients about the replacement interest rate index and interest rate reset.
Reasons for changing the interbank interest rate benchmark and the scope of changes:
- Interbank interest rate indices, such as LIBOR, EURIBOR, show the price at which banks are willing to lend funds to other banks in major world currencies. Together with the Bank’s fixed margin, which is determined individually for each client, they form the interest rate applied to loans.
- Money market indices, information on their changes, the development of international and European regulation and the development of the EURIBOR index for the formation of new indices are provided by the European Money Markets Institute (EMMI).
- In 2016, the European Union established a framework to ensure the accuracy and fairness of the calculation of indices used as benchmarks in financial instruments and financial agreements. To ensure smooth implementation thereof, a transitional period ending at the end of 2021 has been set.
- In 2017, the United Kingdom Financial Conduct Authority (FCA) and the Financial Policy Committee of the Bank of England (FPC) noted that the decline in activity in the interbank lending market raises serious questions about the future sustainability of the LIBOR index. An agreement has been reached between the official authorities and the banks providing the data for the index to support the index until the end of 2021. The period until the end of 2021 is a transitional period for banks and other market participants to abandon the LIBOR index and switch to alternative interest rate benchmarks.
If the client does not agree that the LIBOR interbank interest rate index (in EUR) in his/her loan agreement be changed to EURIBOR, he/she will have the right to terminate his/her loan agreement with the Bank free of charge and without paying the early repayment fee until 30 December 2021 by refinancing or repaying the loan.
If the client agrees with the above changes, he/she will not be required to take any further actions – on 1 January 2022, the Bank will replace the LIBOR interbank interest rate index in the existing loan agreements with the EURIBOR index for the same period without any additional arrangements.
Should you have any further questions, contact us by phone at 1813 (+370 37 301 337, for calls from abroad) or by email to email@example.com.