The global financial industry has transitioned away from a key benchmark interest rate — the London Interbank Offered Rate, or LIBOR — to new alternative reference rates (ARRs). Wells Fargo no longer issues new LIBOR products, and all new deals and renewals are priced using an ARR. Wells Fargo selected the Secured Overnight Financing Rate (SOFR) as the primary ARR for use in new contracts.

If you have an adjustable-rate loan or a corporate loan, chances are some of your transactions continue to reference LIBOR, or certain investments you hold continue to use LIBOR as a benchmark. Now that the industry has shifted away from LIBOR to ARRs for new contracts, we’re here to help you understand the new rates and how these changes may impact your transactions, as well as help answer any questions that you may have about LIBOR transition.

This global transition is an evolving process. But we are an active member of global industry working groups, and we will continue to follow developments, take necessary measures, and provide critical information to support a smooth transition for our customers.

Understanding the LIBOR transition

Why it’s significant

LIBOR stands for London Interbank Offered Rate. It’s an index intended to reflect interest rates that major banks charge each other for short-term loans. LIBOR was used internationally as a benchmark or “reference rate” for setting rates on loans and other financial products.

The effort to replace all LIBORs is an organized global initiative. International working groups were established to identify appropriate ARRs and develop a transition strategy for each currency’s LIBOR. Wells Fargo is an active member of many of the international working groups, including the Alternative Reference Rates Committee in the U.S. We have set in motion the process of changing hundreds of thousands of affected contracts and related systems, employing recommendations of the international working groups and trade associations.

Why LIBOR is being replaced

LIBOR has been a long-established global benchmark for interest rates, but its credibility has declined over the past decades. During the financial crisis that began in 2007, LIBOR sometimes behaved in unpredictable and volatile ways.

Although improvements have been made to the system, the volume of transactions supporting LIBOR continues to shrink, and the calculation of LIBOR is increasingly perceived as a subjective process based more on hypothetical transactions and judgment than actual transactions. As a result, the regulator of LIBOR called for the market to transition to more robust reference rates.

What’s replacing LIBOR

Regulators worldwide convened currency-based working groups to recommend ARRs to serve as alternatives or replacements for the different currency inter-bank offered rates (IBORs), as shown in the following table:

Alternative reference rate
U.S. dollar (USD) LIBOR1
Secured Overnight Financing Rate
Sterling Overnight Index Average

Euro Short-Term Rate
Swiss Average Rate Overnight

Tokyo Overnight Average Rate

1. No new USD LIBOR issuance after December 31, 2021. USD LIBOR 1-week and 2-month ceased publication immediately after December 31, 2021. Other USD LIBOR settings will cease publication on a representative basis after June 30, 2023.

2. No new GBP LIBOR issuance. All GBP LIBOR settings either ceased publication or became non-representative after December 31, 2021.

3. All EUR LIBOR settings ceased publication after December 31, 2021.

4. EURIBOR continues publication alongside €STR.

5. EONIA was recalibrated on October 2, 2019, to be €STR + 8.5 bps and was discontinued on January 3, 2022.

6. All CHF LIBOR settings ceased publication after December 31, 2021.

7. All JPY LIBOR settigs either ceased publication or became non-representative after December 31, 2021.

8. TIBOR cotinues publication alongside TONAR.

Wells Fargo offers ARRs in addition to those set forth above. You should discuss the options with your Wells Fargo representative. Wells Fargo may offer other market established benchmarks where there is client demand for them and where appropriate. Customers should independently evaluate and consult their advisors concerning the financial, market, legal, regulatory, credit, tax and accounting risks and consequences of entering into products referencing ARRs.

The end of LIBOR is approaching

US and global regulators expect and have directed banks to cease offering new LIBOR-based products after December 31, 2021, except in certain, narrowly-prescribed circumstances.

Existing LIBOR contracts can continue to be serviced through the June 30, 2023 cessation date; however, Wells Fargo will be working with customers to move to an ARR in advance of LIBOR cessation, where possible.

What we have done and continue to do to prepare

We have already taken several steps to build the foundation for the remaining US dollar LIBOR contracts to transition as we continue to listen to customers’ concerns. Here’s what we’ve done so far:

  • Provide customer education: It’s important that all of our customers understand this global market change and its impacts. Since September 2018, we have undertaken a major effort to talk directly to customers about the transition and listen to concerns. We’ve already conducted customer outreach in dozens of U.S. cities and our international markets. As the end of LIBOR approaches, we’ll continue to keep our customers informed. 
  • Implement new contract language and products: Over the past few years, we’ve encouraged use of more robust “fallback language” in our contracts that contemplates the end of LIBOR. We’ve launched a wide range of products based on ARRs and have developed contract standards and protocols for these products. Going forward, we expect that many contracts will be amended to transition to an ARR ahead of LIBOR cessation in June 2023.

Learn more

To ensure that you and all of our customers are informed with the appropriate information and equipped to make educated decisions, we’ll continue to provide you with helpful resources. 

For more information about the LIBOR transition, please see our Contact Us page to discuss with the relevant lines of business. 

You can also find industry information on the transition away from LIBOR, other interest rate benchmarks, and the Private/Public-Sector IBOR Transition Working Groups: