LIBOR Transition

The LIBOR transition involves moving away from the London Interbank Offered Rate (LIBOR), a key benchmark used globally to set interest rates for loans, mortgages, and financial products. LIBOR has been based on estimated borrowing costs of banks, but due to concerns about its reliability and manipulation, regulators are replacing it with safer, more transparent reference rates like SOFR in the U.S. and SONIA in the UK. This shift aims to improve market stability and integrity, affecting trillions of dollars worth of financial contracts that previously depended on LIBOR.