Communicating Changes Caused by the LIBOR Phase-out
As you may know, LIBOR (London Interbank Offered Rate) is a global interest rate benchmark that banks use to lend to each other. Many banks also use LIBOR as a reference rate for commercial and consumer loans that carry an adjustable rate. As a result of some global scandals related to LIBOR rate manipulation, it will be phased out by the end of 2021.
What does it mean for your bank?
Your credit executives may already be determining the scope of the impacts and assessing options for alternative interest rate benchmarks to replace LIBOR. They will need to develop a timetable for the phase-out as well.
What does it mean for your customers?
A change to an interest rate benchmark will impact any commercial or consumer loan customer with an adjustable rate based on LIBOR, and they will need to receive a change in terms notice describing the change. Different customer segments may be impacted differently depending on the types of loans they have and the terms of their loans.
What does it mean for your marketing team?
You’ll want to consider different strategies to communicate the changes to various customers, from large corporates to middle market to consumers. Until the final decisions are made as to timing and replacement rate benchmarks, you may want to consider interim communications to keep your customers informed and reassured. And once you define the actual Change in Terms, you’ll need to communicate those details.
Why is it important to plan ahead?
It’s wise to begin discussions early on, so that you can build an effective communications strategy and tactical plan to ensure that you deliver the very best customer experience. If you haven’t yet done so, you may want to consider reaching out to your lending teams to start the ball rolling.
Do you need supplemental resources?
The LIBOR phase-out creates a complex communications challenge. Give some serious thought now to engaging with a partner to help you create thoughtful strategies and execute smart tactical solutions. Even matter-of-fact change communications should support your brand and reinforce customer loyalty. That’s why it’s important to tackle the LIBOR project from a marketing perspective as well as a legal lens.
MKP communications inc. is a New York City-based communications company that delivers spot-on strategy, smart, fresh creative, and flawless execution, exclusively for financial services clients.