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14th June 2021

Dear Customer,

In July 2020 we wrote to advise you that, following announcements by the Financial Conduct Authority (“FCA”), the GBP LIBOR benchmark used as the basis for the pricing of your loans/facilities will cease to exist at the end of 2021. Consequently, we are working to ensure that all of our clients’ GBP LIBOR facilities are moved to a new benchmark rate before that time. Alpha Bank is proposing to move its business customers to the Bank of England Bank Rate (commonly known as the Bank of England Base Rate and referred to in this letter as the “Base Rate”). 

What does this mean for you?

If you have any existing GBP LIBOR facilities that expire after December 2021:

  • We propose transitioning any loan facility from GBP LIBOR to Base Rate once GBP LIBOR ceases by amending the facility prior to the end of 2021.
  • Once amended, when GBP LIBOR ceases, interest rates on any outstanding loans will be calculated by reference to the Base Rate + a credit spread adjustment (see below) + margin, until maturity of your existing loan.
  • GBP LIBOR and the Base Rate are different rates and do not necessarily move in line with each other. In addition, in recent years the Base Rate has generally been lower than 3-month GBP LIBOR, so it is necessary to add a “credit spread adjustment” to the Base Rate to ensure that, so far as possible, the economic (pricing) difference between GBP LIBOR and Base Rate is eliminated.  The use of a credit spread adjustment is in line with industry practice on the replacement of LIBOR and is recommended by relevant industry working groups and recognised by the FCA[1]. We have calculated the credit spread adjustment that will apply to your loan in accordance with a commonly used industry methodology (based on the 5-year historical median of the difference between 3M GBP LIBOR and the Base Rate), as of the date when the FCA definitively announced the cessation of GBP LIBOR (5 March 2021).
  • As at the 5 March 2021 the credit spread adjustment was calculated at 0.08%. This figure will not change until your loan matures.
  • The benchmark rate for your loan will change to the Base Rate from your first rollover date following 31 December 2021 (the date on which GBP LIBOR ceases).
  • For example, if you have a loan expiring 30 June 2022 where you are paying 4% above 3M GBP LIBOR this will change to 4% above the Base Rate which is currently 0.1% plus the credit spread adjustment of 0.08% (total 4.18%) from the first interest payment date following the date of GBP LIBOR cessation. For the avoidance of doubt, for loans moving to the Base Rate all clients will be charged the same credit spread adjustment.

In selecting the Base Rate plus a credit spread adjustment to replace GBP LIBOR, we have chosen a replacement rate which we believe to be fair for our customers and that ensures transparency given the Base Rate is a robust and well publicized benchmark rate.

What happens now:

We will be writing to you in due course with specific documentation covering your loans and you will be asked to review the documentation and to sign and return this to us.

Where can you find more information:

Further information is available on our website and via the following links:

If you have any questions please do not hesitate to contact your relationship manager or me on 0207 332 9228. 

Kind Regards,

Joseph Neophitou
General Manager

[1] https://www.fca.org.uk/markets/libor/conduct-risk-during-libor-transition