PREPARING FOR 2022: What you need to know about LIBOR transition?

Since its formalization in 1986, the London Interbank Offered Rate (LIBOR) has been providing financial institutions with benchmarks for setting interest rates. However, LIBOR is being replaced and shall ultimately phase out by the end of 2021 for some settings and by 30 June 2023 for all remaining settings, due to changes in United Kindom regulations. The “LIBOR transition” will encompass the movement of the financial markets away from using LIBOR as the interest rate benchmark to using alternative benchmark rates.

Why is it being phased out?

Since the financial crisis in 2007/2008, LIBOR is no longer sustainable and has put its future viability in doubt. Interbank lending and borrowing started to decrease as banks searched for other alternatives to acquire financing. With inaccurate reporting of interest rates by some banks to Intercontinental Exchange London Interbank Offered Rate (ICE),LIBOR became vulnerable to rate manipulation and hence financial participants’ trust eroded.

LIBOR –THE END IS NEAR – Counting down to end 2021

2021/12/31 23:59:59

When will LIBOR be phased out?


Immediately after 31 December 2021, all LIBOR settings will be phased out.


  • Immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc, and Japanese yen settings, and the 1-week and 2-month US dollar settings.
  • Immediately after 30 June 2023, in the case of the remaining US dollar settings. The sole purpose of this extension is to deal with trickier historical transactions in US LIBOR settings. Additionally,




With more than $400 trillion worth of contracts related to the London Interbank Offered Rate (“LIBOR”), the task to replace it, is no less decisive. Loans, derivatives and all sorts of exotic products erstwhile pinned to LIBOR will be now priced using an alternative benchmark. This will in turn have a broader impact on IT systems, contract modifications, accounting treatments and valuations which will also need to be managed. At ABC Banking Corporation, we have already kick-started the transition process and the bank is getting ready to shift to the new alternative benchmark by the end of 2021.

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The bank’s timeline has been set by the Bank of Mauritius and will be 31 December 2021 for all LIBOR related benchmarks. This timeline is applicable to all banks in Mauritius.
You will not be impacted if your facility is not linked to LIBOR or if your facility is linked to LIBOR but will mature before 31 December 2021.
If you have a facility with the bank which is linked to LIBOR and will mature after 2021 then this transition will be relevant to you. Once the alternative rate is chosen, we shall advise on same and the specific changes to be brought to the agreement you have with the bank in relation to matters regarding the new benchmark rate, credit adjustment spread, and repayment terms among others.
Regulator authorities as well as commercial banks and other market players have set up working groups and are currently working on the best alternative rates to replace LIBOR in each currency settings. Those rates are already established globally and will be communicated as soon as possible. It is very likely that SOFR Secured Overnight Financing Rate will be used to replace USD LIBOR.
Industry consensus
ABC Banking as part of the industry working group will first receive recommendations at the industry level to adopt a certain rate ABC Banking will then ascertain if this rate is effectively the best available substitute.
Other guiding principles are as below.


ABC Banking will choose a rate that does not systematically lead to gains or losses to the bank or customers as a result of the transition, i.e., we shall aim for minimal impact on economic value to stakeholders.


ABC Banking will opt for uniformity, that is, all impacted parties will be offered the same option.


Full transparency
ABC Banking will also be fully transparent with regards to how the rates are calculated, what margins are used etc. Information will be fully disclosed to the Board and the commercial parties concerned.

For more information, click HERE for the Mauritius Bankers’ Association (MBA) FAQ.