LIBOR Cessation and Customer Impact 

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The London Interbank Offered Rate (LIBOR) index will no longer be available after June 30, 2023. Additionally, regulatory agencies around the globe have made clear that no new or renewed contracts should use LIBOR after December 31, 2021. In preparing for this industry transition, Comerica has been consulting with third parties and participating in industry governance bodies (see the announcement here for the latest industry guidance on LIBOR cessation). Comerica is committed to keeping its colleagues, partners and customers informed as to how a transition from LIBOR to a replacement interest rate will impact them and our bank.

The content below provides general information regarding the LIBOR index and possible replacement indexes. For more specific details, Comerica customers are encouraged to contact their Relationship Manager or Private Banker. As we have for over 170 years, Comerica will partner with its customers to effectuate a successful transition to a new replacement interest rate index.

Important Recent Announcements

Customer Notification -- Cessation of One-Week and Two-Month LIBOR: On March 5, 2021, LIBOR’s administrator, the ICE Benchmark Administration (the “IBA”), stated that it will cease publishing one-week and two-month LIBOR tenors immediately after Dec. 31, 2021. On March 5, 2021, the UK’s Financial Conduct Authority, the regulatory supervisor for the IBA, also confirmed that those LIBOR tenors will either cease to be provided by any administrator or will no longer be representative after Dec. 31, 2021. Click here to read Comerica’s full customer notification on the cessation of one-week and two-month LIBOR.
 

What is LIBOR?

LIBOR, also referred to as the LIBOR index or LIBOR rate, has been a globally accepted key benchmark interest rate used to help determine the interest rate on a wide variety of financial products including, among others, derivatives, commercial loans, mortgages, student loans, bonds, credit cards and interbank products. In the United States, LIBOR is tied to more than $200 trillion of financial products, including commercial loans and interest rate derivatives. The rate is calculated and published each day by the Intercontinental Exchange (ICE).

Why is LIBOR being discontinued?

LIBOR is being discontinued because it is based on transactions among banks that don’t occur as often as they did in prior years, making the index less reliable and credible. Today, LIBOR is based on expert judgements and not market transactions.

What interest rate will replace LIBOR?

There are multiple rate indices that have now become available in the market to replace LIBOR. The loan market is continuing to evolve and has not yet coalesced around one particular rate index as a replacement. One of the current leading alternatives is the Bloomberg Short-term Bank Yield index (“BSBY’). Comerica has decided to adopt the use of BSBY as its primary rate index to replace LIBOR.

What is BSBY?

The Bloomberg Short-term Bank Yield (BSBY) index is a credit sensitive, short-term bank yield index. Developed by Bloomberg, this index is based on transaction-related data, including both actual executed transactions and firm, executable quotes (over $150 billion in transactions).

What is SOFR? 

Another index evolving in the market is the Secured Overnight Financing Rate (“SOFR”). SOFR is a broad measure of the cost of borrowing cash overnight in the repo market, collateralized by Treasury securities. It is calculated as a volume weighted median of transaction level tri-party repurchase agreement (repo) transactions data. It has much liquidity and is very deep, with approximately $1 trillion of trading daily. 

Why is Comerica prioritizing BSBY over other available indices?

BSBY is very similar to LIBOR yet eliminates the major flaws in LIBOR. From an operational perspective, BSBY functions very similar to LIBOR, making it significantly easier for lenders and borrowers to utilize. It also reflects the funding cost across a range of markets more accurately than some of the other available indices. BSBY is IOSCO (International Organization of Securities Commissions) compliant. Since it is entirely based on actual transactions and firm, executable quotes in the funding markets rather than subjective judgements, it protects against many of the prior issues with LIBOR.

What is Comerica doing to prepare for the transition from LIBOR? 

Comerica initiated a LIBOR transition program in January 2019 with a dedicated program office, governance structure and team of colleagues engaged across its enterprise. We are working to update our systems, processes, loan documents and products to prepare for the eventual cessation of LIBOR and ensure a smooth transition.

In compliance with regulatory guidance, Comerica has commenced the transition away from LIBOR and will cease offering LIBOR as a pricing benchmark for new loans, loan renewals or maturity extensions. Even though the publication of certain tenors of LIBOR has been extended to June 30, 2023, Comerica, along with other regulated financial providers, is required to utilize a pricing benchmark other than LIBOR in all new and amended loans prior to Dec. 31, 2021

Will Comerica customers be impacted by the cessation of LIBOR? 

Yes. All Comerica customers with existing commercial and consumer loans, leases, residential mortgages, interest rate derivatives, and student loans that incur, or could incur, interest at a LIBOR-based benchmark interest rate will be impacted by the cessation of LIBOR. The LIBOR transition will not impact non-LIBOR based loans. Comerica customers are encouraged to reach out to their Relationship Manager or Private Banker if they have questions. 

We will keep customers apprised of changes and developments as the market continues to evolve and transition away from LIBOR.

Learn More

The resources below provide additional information regarding the transition from LIBOR.

PLEASE BE AWARE, THERE COULD BE CHANGES TO THE INFORMATION SET FORTH ABOVE (COLLECTIVELY, THE “INFORMATION”) AT ANY TIME, FROM TIME TO TIME, AND AS A RESULT, THE INFORMATION IS SUBJECT TO CHANGE WITHOUT NOTICE. BY PROVIDING YOU WITH THE INFORMATION, WE ARE NEITHER UNDERTAKING AN OBLIGATION TO UPDATE THE INFORMATION, NOR IS THE INFORMATION PROVIDING ANY LEGAL, FINANCIAL, ACCOUNTING, TAX OR INVESTMENT ADVICE UPON WHICH YOU SHOULD RELY TO MAKE DECISIONS. YOU SHOULD REACH YOUR OWN CONCLUSIONS AND DECISIONS IN CONSULTATION WITH YOUR OWN LEGAL AND FINANCIAL ADVISORS WITH  RESPECT TO ANY IMPACT THAT THE INFORMATION MAY HAVE ON ANY FINANCIAL ARRANGEMENTS TO WHICH YOU ARE A PARTY OR OTHERWISE.