IFC has switched to SOFR for all new USD business effective Jan. 1, 2022.
In line with global USD lending markets, IFC ceased issuing new financial instruments based on LIBOR—the London Interbank Offered Rate—on Dec. 31, 2021. LIBOR will continue to be quoted until June 30, 2023, for existing legacy transactions previously committed in LIBOR.
IFC has conducted a comprehensive analysis of the impact of the transition on our corporation from a lending, funding, accounting, operations, information technology, and legal perspective, and we are now able to offer USD variable rate loans referencing Term SOFR and/or Daily Compound SOFR. If you require products beyond Term SOFR or Daily Compounded SOFR, please contact the LIBOR team or your relationship manager.
IFC is also collaborating with partners in the financial industry, including other Multilateral Development Banks and Development Finance Institutions, to ensure consistency with industry developments and develop best practices, for example, with mechanisms for transitioning bilateral and multilateral transactions.
If you have any questions, please contact IFC at firstname.lastname@example.org.
IFC’s Transition from LIBOR
LIBOR was the most widely used interest rate benchmark to price or value a wide range of financial products, including corporate and personal loans, mortgages, bonds, securitizations, and derivatives, underlying over $370 trillion of transactions across the globe.
In 2014, following developments in the global markets that revealed weaknesses in LIBOR’s sustainability as a reference rate, the U.S. Federal Reserve commissioned the Alternative Reference Rate Committee (ARRC) to recommend a benchmark interest rate that would replace USD LIBOR, or the short-term reference rate for dollar-denominated debt. In 2017, the ARRC selected SOFR as its preferred alternative to US LIBOR, representing best practice for use in certain new USD derivatives and other financial contracts.
On March 5, 2021, the United Kingdom’s Financial Conduct Authority (FCA) announced dates on which panel bank submissions for all LIBOR settings would cease and after which representative LIBOR rates would no longer be available:
- Dec. 31, 2021: one-week and two-month USD settings and all non-USD settings
- June 30, 2023: all other USD settings
July 29, 2021, the ARRC formally recommended the forward Term SOFR published by CME Group, Inc. (CME) for use in business loans. On Dec. 22, 2021, IFC signed one of the first emerging-market loans based on Term SOFR as a replacement rate for LIBOR, in one of the first emerging market transactions of its kind by a development finance institution or commercial bank.
For the latest information on market guidance and the transition process, please visit these websites:
Alternative Reference Rates Committee
For U.S. dollar markets, efforts toward determining an alternative benchmark rate are being led by the Alternative Reference Rates Committee, which includes private market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York.
International Swaps and Derivatives Association
The transition in the derivatives market is being led by the International Swaps and Derivatives Association, which the Financial Stability Board tasked to remediate the relevant provisions in the derivatives contacts.
Last Updated: Febuary 15, 2022