Banks seek special funding costs clause [Libor no longer accurate?]

Banks are looking at passing on higher funding costs to corporate borrowers by invoking an extraordinary clause in loan agreements triggered by market turmoil. A growing number of banks are concerned that Libor – a benchmark for interbank borrowing costs and the base for calculating the interest rate for many corporate loans – is no longer accurate in reflecting their actual funding costs. Some are now considering whether they can invoke a “Market Disruption Clause” in loan agreements on certain undrawn credit facilities, allowing to charge higher interest rates to borrowers. The Loan Market Association, a trade body representing lenders,...

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