LIBOR No More — How a Legal & Financial Language Translator Can Help

The London Interbank Offered Rate (known more popularly as LIBOR) was the number one benchmark for setting short-term interest rates for more than 40 years. But as of December 31, 2021, it no longer holds sway in the financial world.

As financial institutions scramble to adjust to this massive change, legal translation services are in high demand. A legal and financial language translator can ensure foreign-language documents meet these new standards.

Why is LIBOR Ending?

LIBOR is an outdated method for calculating interest for the global markets. It wound up on the chopping block because it hasn’t kept up with these markets as they’ve grown in size and complexity.

There’s also the issue that LIBOR was at the centre of several scandals, not least of which was its role in the 2008 recession.

As a result, global authorities announced the end to LIBOR for new business contracts back in 2020, signalling its retirement in 2022 with plenty of warning.

What is Replacing LIBOR?

No single document will replace LIBOR, making this transitionary period difficult for financial and legal institutions on a global scale.

Instead, multiple heirs have arrived.

• The UK has SONIA (the Sterling Overnight Index Average)

• The US has adopted the SOFR (Secured Overnight Financing Rate)

• The EU has SARON (Swiss Average Rate Overnight) and ESTER (Euro Short Term Rate)

• Hong Kong has HONIA (Hong Kong Dollar Overnight Index Average)

• Japan has introduced TONA (Tokyo Overnight Average Rate)

What Does This Mean for Financial and Legal Documents?

The alphabet soup above illustrates how complicated this transition has been and will continue to be.

It isn’t simply a case of swapping out one method for another but integrating a patchwork of several different options depending on the location of the business deal. Lawyers and financial advisors will have to take geography into account to ensure they appropriately upgrade documents that reference LIBOR.

Language also plays an enormous role in this transition. Not only will foreign language interest rate measures require expert translations, but individual contracts may need to be translated to reflect the newest guidelines.

Why You Need a Legal & Financial Language Translator

Translating in-house is a time-consuming drain on your resources that puts pressure on your bilingual partners — if you have any at all.

The few partners who speak more than one language may not have the fluency required to make legal translations that meet the latest regulatory conditions. More likely, most of your lawyers will speak just one language.

A legal and financial translator, on the other hand, is a skilled professional who makes expert translations within these industries. You can find such a professional through a certified legal translation agency.

The top legal translation companies have a large team of translators, each with different specialisations and languages. They can partner you with the right professional for the job, regardless of the location or language.

As an experienced legal & financial language translator, this expert makes flawless translations free from numerical errors.

The Bottom Line

The death of LIBOR has triggered some of the biggest changes in the financial spheres within recent memory. A lot of work will go into amending contracts and drafting new financial documents.

Any mistakes over translation errors could result in the loss of billions of dollars in business. To avoid these costly mistakes, make sure your legal and financial language translator comes from an esteemed agency.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes