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LIBOR Transition

Texas Capital Bank has prepared for the cessation of the London Interbank Offered Rate (LIBOR) index on June 30, 2023 by ending origination of new LIBOR loans and actively converting existing LIBOR loans to a supported rate index by December 31, 2022.



    What is LIBOR?

    London InterBank Offered Rate – a benchmark interest rate set in London each business day for multiple currencies. 

    Why is LIBOR going away?

    Due to confirmed manipulations, and concerns about the breadth and depth of the market behind LIBOR (the lack of which has resulted in LIBOR being sustained by “expert judgment” on the part of the panel banks), consensus is that there needs to be a more viable benchmark rate supported by active underlying markets. The UK Financial Conduct Authority announced that, as of the end of 2021, it will no longer regulate LIBOR or require panel banks to report LIBOR transactions. As a result, it is expected that LIBOR will no longer be a common benchmark rate for financial transactions at that time, or even well before the end of 2021. 

    How fast will the transition to a new rate happen?

    All new loans and renewals will use the new benchmark in 2022.  For existing loans, LIBOR can be used until June 30, 2023.  Any loans that mature after June 2023 will need to be converted to the new benchmark.

    What is Texas Capital Bank doing to prepare for this transition?

    A LIBOR Transition Working Group has been working on this for over 2.5 years, and is composed of participants from all areas of the Bank impacted by this transition.  All potential risks have been evaluated and plans have been made to address them.

    Why are these changes important to Texas Capital Bank and its clients?

    These changes are important to ensure there is no confusion as to the process for determining the rate used in any contracts between Texas Capital Bank and other parties, and so that funding and advances can be made in an orderly manner.

    What will change in loan documentation?

    New benchmark language will be added to all new and renewed loans.  Existing loans have “fallback language” to establish an alternate index rate of interest when LIBOR is no longer a viable reference rate.  Given the “end date” of LIBOR publication of June 30, 2023, this would only be utilized if the loan is not converted to a new benchmark prior to this deadline.  This will ensure normal functioning of interest payments. 

    Please reach out to your relationship manager, or the LIBOR Transition Working Group ([email protected]) for further questions. 

    Still have questions about the LIBOR transition?

    Get in touch with the team at Texas Capital Bank for more information.

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