The following is provided for general information only and you should conduct your own independent research and analysis regarding the risks involved in conjunction with your legal, tax and/or accountancy advisors. The statements below are not exhaustive, HSBC Bank A.Ş and HSBC Group (“HSBC”) are not in a position to express a view on the likelihood of any particular event occurring nor is HSBC providing any advice or recommendation.
The London Interbank Offered Rate (“LIBOR”) and the Euro Interbank Offered Rate (“EURIBOR”) are interest rate benchmarks often used to determine the interest payable under banking products including loan and/or trade facilities.
Widely used across the banking industry, LIBOR and EURIBOR are subject to national and international regulatory guidance and reforms, and recent developments may cause them to perform differently than they have in the past or to disappear entirely. For example:
In such circumstances, a loan or trade facility may have provisions to address the temporary unavailability of LIBOR and EURIBOR as interest rate benchmarks. However these provisions may not be appropriate or work on a permanent discontinuation of LIBOR or EURIBOR. This may create uncertainty in the value and calculation of interest payments due under the relevant product.
As you are considering using products from us that use LIBOR or EURIBOR to calculate payments, we wanted to make you aware of the potential impact these changes and the use of RFRs may have on such products in the future. This information may help you decide whether a different product is more appropriate.
While the banking industry is developing a more permanent solution, the current expectation is that impacted loans may need to be amended to refer to an alternative interest rate benchmark. This may affect you in the following ways:
If you are using a derivative product to hedge your facility with us or any other provider, the fallback interest rates that may apply may no longer match and could result in the facility ceasing to be hedged appropriately by that product.
These changes are not expected to impact facilities that use local interbank offer rates as a benchmark, such as the Emirates Interbank Offer Rate (“EIBOR”) or the Turkish Lira Interbank Offer Rate (“TRLIBOR”).
We are unable to provide specific advice or recommendations to you on this issue. However, given the current levels of uncertainty and the complexity of this issue, we strongly recommend you seek guidance from your usual professional advisors if you have any questions.
Further information is available at: www.gbm.hsbc.com/ibor