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THE LIBOR TRANSITION
Replacing the world’s most widely used interest rate benchmark.
Update your TriState Capital Hedging Transaction
You received a letter, dated December 2nd, 2022, from TriState Capital if you have a LIBOR based hedging transaction associated with your loan.
If you did not receive a letter no action is required. This content applies to LIBOR based loans with hedging transactions.
This page contains a link to a DocuSign® letter to update the fallback language in your hedging transaction with TriState Capital bank.
This document contains information sent in the letter. Information specific to your loan has been removed. To complete the form please have the on-line agreement code sent in your letter.
FREQUENTLY ASKED QUESTIONS
We have designated a team comprised of senior management and subject matter experts across multiple disciplines within the bank to facilitate the transition and adoption of an alternative reference rate (ARR).
We are preparing our systems to support products and financial instruments referencing alternative reference rates, such as SOFR, as we will not issue new products / instruments referencing US dollar LIBOR after December 31, 2021.
We are coordinating with clients and counterparties to incorporate the appropriate fallback language in all new and legacy US dollar LIBOR agreements and amendments.
The Alternative Reference Rate Committee (ARRC) has proposed the Secured Overnight Financing Rate (SOFR) as the preferred replacement to US dollar LIBOR.
SOFR is a secured, overnight rate that correlates closely with other money market rates. It is fully transaction based and covers repo
markets secured by US Treasuries.
SOFR was introduced by the New York Fed in cooperation with the US Treasury Department in April 2018.
There are a range of alternative reference rates available across the market, however, it is expected that an overwhelming majority of market participants will proceed with a conversion to SOFR.
US dollar LIBOR is a rate at which representative banks are able to borrow on an unsecured basis in the Interbank market. It has multiple forward-looking tenors, including overnight, 1-week, 1-month, 2-months, 3-months, 6-months, and 12-months.
SOFR is an overnight, near-risk free rate and is based on transactions in the repo markets which are secured by US Treasuries.
Term SOFR was officially recommended by the Alternative Rate Reference Committee (ARRC) on July
It is a forward‐looking term rate for the applicable corresponding tenor based on SOFR that has been
selected, in this case, for 1-month. More simply this can also be thought of as Market expectations for
forward‐looking SOFR, compounded over relevant reference period. The 1-month term SOFR ticker is
- Resilient – set of term SOFR rates can be produced in all market conditions, including periods of market fragmentation, illiquidity, or negative interest rates.
- Robust – it is resistant to manipulation and anchored in real transactions and executable quotes “expert judgement” is not used as in the case of LIBOR.
- Coherent – integrity and shape of yield curve is maintained throughout the calculation process while utilizing all possible transaction data
Contracts that fall back from 1-month LIBOR to 1-month SOFR use the ARRC spread adjustment of 11.448 bps. The spread adjustment is based on a historical median over a five-year lookback period calculating the difference between USD LIBOR and SOFR. The fallback spread adjustment published by Bloomberg became fixed as of March 5, 2021.
For additional information regarding the Libor transition, please visit the following:
- ARRC: https://www.newyorkfed.org/arrc
- Historical SOFR data: https://apps.newyorkfed.org/markets/autorates/SOFR
- ISDA benchmark reform: https://www.isda.org/category/legal/benchmarks/
- Federal Reserve Bank of New York: www.newyorkfed.org
- Summary of the ARRC’s Fallback Recommendations: www.newyorkfed.org
Please note that the information in these FAQs is subject to change without notice.
These FAQs are provided solely for general informational purposes and with the understanding that neither TriState Capital, its affiliates nor any other party is engaging in rendering financial, legal, tax, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcome in the context of the facts surrounding your particular circumstances. These FAQs were developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. Circumstances concerning the subject matter can change before the FAQs can be updated. NEITHER TRISTATE CAPITAL NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THESE FAQS EVEN IF TRISTATE CAPITAL AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS, OR EXPENSES. TriState Capital Bank is an Equal Housing Lender and Member FDIC.