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Libor SOFR

BankingLibor SOFR
November 17, 2020

Replacing Libor: No Criticism for Banks That Say ‘No Thanks’ to SOFR

Regulators say banks can price loans using any appropriate reference rate as they prepare for Libor’s end.You may possibly have missed a development that happened three days after the presidential election: US banking regulators gave banks more confidence they can decide to use Libor-replacement rates other than the secured overnight financing rate (SOFR), which the Federal Reserve has endorsed but that some regional banks view as problematic. “Examiners will not criticize banks solely for using a reference rate, including a…
Justin Jones
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BankingLibor SOFRRisk Management
November 12, 2020

Mismatched Hedge Risk: Derivative Values May Change as Libor Ends

Standard Chartered, helping corporates prepare for risk-free rates, describes the potential risk of “valuation jump.”The replacement of Libor by risk-free rates (RFRs) like the secured overnight financing rate (SOFR) in the US and the sterling overnight indexed average (SONIA) in the UK has been a hot topic at NeuGroup fall meetings where banks, regulators and other experts have been helping members prepare for Libor’s planned demise at the end of 2021. At a second-half meeting of the Asia Treasurers’ Peer…
Justin Jones
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Capital MarketsLibor SOFR
October 29, 2020

Will You Be Ready When Libor Is No Longer “Representative”?

Preparing for fallback language that could be triggered when a UK regulator deems Libor non-representative.The global pandemic has not slowed the march toward Libor’s demise, scheduled for the end of 2021. And corporates have a lot to do long before then. Just last week, ISDA launched a fallback supplement and protocol, marking what it called a “major step” in reducing the impact of Libor becoming unavailable “while market participants continue to have exposure” to it.The supplement includes “robust fallbacks for…
Justin Jones
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Libor SOFRTechnology
September 24, 2020

Looking Beyond Libor: Engage Vendors, Expect Some Frustrations

Corporates preparing for a transition to SOFR may need to push some systems vendors.NeuGroup members appear to be making headway to transition floating-rate exposures to the secured overnight financing rate (SOFR) or an alternative Libor replacement. However, in a meeting in which two members detailed their preparations, a major concern arose about third-party vendors’ progress and the need to push them along.   Responding to polling questions during the meeting session, 70% said they have compared notes with peer companies about their…
Justin Jones
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BankingLibor SOFR
September 15, 2020

Excitement Borne of Frustration Greets Ameribor 30-day Term Rate

Bank treasurers facing Libor’s end welcome news on a forward rate from the AFX. Libor’s days are numbered and bank treasurers eager for the development of a forward-looking, term interest rate that has a credit component got some good news last week: The American Financial Exchange (AFX) announced an indicative 30-day forward rate called Ameribor30 whose base rate is overnight Ameribor, which reflects the unsecured borrowing costs of more than 1,100 American lenders.“I’m pretty excited about it,” one member of…
Justin Jones
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BankingLibor SOFR
August 25, 2020

Leaving Libor in the Dust: Look for SOFR Loans in Early 2021

Banks could price corporate loans using SOFR sooner than ARRC best practices suggest. The Alternative Reference Rates Committee (ARRC) guiding the US transition for cash products is pushing for Libor pricing to cease for certain types of debt by the end of this year, and other types of debt may soon follow. Floating-rate notes, for example, should be priced by year-end using an alternative benchmark, according to best practices published in late May by the ARRC, which comprises mostly large banks…
Justin Jones
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BankingCapital MarketsLibor SOFR
August 13, 2020

Life After Libor: Ameribor Holding Its Own as Regulators Back SOFR

Banks already price commercial loans over Ameribor and a term version is in the works. Ameribor, the benchmark alternative interest rate to Libor devised by the American Financial Exchange (AFX), is managing to stay in the conversation despite the endorsement by the Federal Reserve of the secured overnight financing rate (SOFR). Ameribor reflects the unsecured borrowing costs of more than 1,100 American lenders. This week, Citizens Financial Group, one of the nation’s 20 biggest banks, with assets of $177 billion, joined…
Antony Michels
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Libor SOFRTreasury Management
June 25, 2020

Transition to SOFR Pushing Ahead Despite Pandemic

The pandemic and its aftermath forced bank treasurers to move the Libor-to-SOFR transition to the back burner; but make no mistake, it is still very much still on the stove.With apologies to the real estate industry, there were three critical issues that mattered to bank treasurers before the pandemic: 1) Libor to SOFR transition, 2) Libor to SOFR transition and 3) Libor to SOFR transition. But now, given COVID-19’s damaging impact on world economies, banks have been presented with new…
Ted Howard
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Capital MarketsLibor SOFR
April 7, 2020

SOFR Passes COVID-19 Stress Test, Bolstered by Stability of Repo Market

The volume of repo transactions underlying the calculation of SOFR has remained strong as the coronavirus disrupted other markets. US regulators’ recommended Libor replacement has performed strongly through the volatility roller coaster powered by the coronavirus. In fact, the overnight repurchase agreement (repo) market used to calculate SOFR has increased in daily volume to more than $1.3 trillion. “With SOFR, you have good reason to be confident that it can always be calculated, and the rate you’re paying reflects actual…
Antony Michels
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Capital MarketsLibor SOFR
March 12, 2020

It’s Time for Nonfinancial Corporates to Gear Up Libor-SOFR Transition Plans

Founder’s Edition, by Joseph Neu NeuGroup member calls with corporate treasury leaders reveal preparation gaps. Some NeuGroup corporate members—nonfinancial institutions—are well on track with planning to transition off Libor before the end of 2021. One company, Ford Motor, has even joined the Alternative Reference Rates Committee (ARRC), a group of private-sector participants convened by the Federal Reserve Board and the New York Fed to help identify alternatives to Libor and develop strategies to promote their use.  However, the majority of…
Antony Michels
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