From 1 January 2022, the LIBOR (London Interbank Offered Rate) index will be abolished, which means that the index in the dollar and euro currencies will be replaced and the SOFR and Euribor indices will be used instead of LIBOR:

• Instead of USD LIBOR index SOFR will be used;
• Instead of the EURO LIBOR index, Euribor, which is already introduced in the banking system, will be used.

The LIBOR Index has defined the weighted average interest rate on interbank loans in the banking system for more than 40 years. During all this time, LIBOR has been a key benchmark for regulated interest rate loans, mortgages, and business loans, as well as has been adjusting interest rate changes for customers and has been reflected in the amount of monthly loan debt.

The index affected any financial activity - including risks and valuations. It was also referred to as "the most important figure in the world." However, confidence in the index has declined significantly over the last decade and has led to a number of crises in the financial sector around the world. These developments have called into question its central role, and the UK Financial Conduct Authority (FCA) has decided to replace the LIBOR Index with other, more secure ones.

EURIBOR (Euro Interbank Offered Rate) – instead of EURO LIBOR:

EURIBOR is the European Interbank Offered Rate Index and reflects the average interest rate on the interbank market as a result of trading in the Euro. Daily dynamics observation and information can be found on the following website https://www.euribor-rates.eu/en/current-euribor-rates/

The change in the interest rate of EURIBOR is reflected in the loan as follows: The change in the interest rate is carried out in accordance with the terms of the loan agreement of the bank. A change in EURIBOR will automatically result in a change in the interest rate not less than the minimum interest rate threshold. The bank is entitled to inform the client about this through the communication means provided by the agreement.

SOFR (Secured Overnight Financing Rate) index instead of USD LIBOR:

SOFR (Secured Overnight Financing Rate) is a broad measure of the cost of borrowing which is secured by U.S. Treasury securities.

The SOFR is issued by the Federal Reserve Bank of New York at various different terms: Overnight, 30, 90, and 180-day rates which are calculated by averaging the results obtained by observation. The data by terms are published on the following website: https://www.cmegroup.com/market-data/cme-group-benchmark-administration/term-sofr.html

The SOFR change in the interest rate of the loan is reflected as follows: The change in the interest rate is carried out in accordance with the terms of the loan agreement of the bank. A change in the SOFR will automatically result in a change in the interest rate not less than the minimum interest rate threshold. The bank is entitled to inform the client about this through the communication means provided by the agreement.

Numerous financial institutions around the world have already moved to the SOFR index. Experts and various regulators consider it a more accurate and safer index.

The main difference between SOFR and LIBOR is how tariffs are generated: LIBOR is the benchmark interest rate that results from trading of major global banks in the interbank market. This rate is based on the prices of unsecured instruments existing in the interbank market.

Unlike LIBOR, SOFR is based on real transactions and is a risk-free index because it is secured by treasury securities, while LIBOR covers interbank credit risk and, in addition to real transactions, is subject to expert judgment.

The transition from LIBOR to the alternative index will not result in a change in the terms of the contract other than a change in the index and the interest supplement related to the index.

For customers already using loan products, EURO LIBOR will change from 1 January 2022, while USD LIBOR will be used on existing loans until June 2023.