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By John Hintze
In March 2021, the administrator of the London Interbank Offered Rate made it official: certain tenors of U.S. dollar Libor would cease to publish on Dec. 31, 2021, with remaining settings terminating on June 30, 2023, for legacy transactions. With the long-telegraphed Libor endgame now set in stone, banks are picking up the pace of transition amid front- and back-end challenges.
One concern held by community, midsize and regional banks that use Libor is that the Secured Overnight Financing Rate, the favored alternative of the Alternative Reference Rate Committee, a public-private group convened by the New York Fed, is that it does not reflect credit risk. In times of market stress, investors flocking to the risk-free rate would cause it to plummet, along with the banks’ returns on SOFR-priced loans, while their cost of funds jumps a bank nightmare.
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First, the ARRC, playing Charlton Heston, playing Moses, brings down from on high the ten commandments of SOFR and lo, we were sore afraid and with veneration, professed we had no God but SOFR. A solution of sorts to a somewhat self-inflicted problem. As we have observed before, we continue to think the solution to the problem of bankers diddling LIBOR is to punish bankers and shore up the system to make it more robust and not to blow up trillions of dollars of transactions and 40 years of precedent. But that train has left the station.
Date
08/01/2021
The American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, announced that FactSet Research Systems Inc. will distribute the following three AFX AMERIBOR® Benchmark Interest Rates:
Overnight unsecured AMERIBOR benchmark interest rate (ticker AMERIBOR)
30-day arithmetic average AMERIBOR benchmark interest rate (ticker AMBOR30)
90-day arithmetic average AMERIBOR benchmark interest rate (ticker AMBOR90)
“This is another significant step in elevating the awareness of AMERIBOR® throughout the worldwide business community.” said AFX Chairman and CEO Dr. Richard L. Sandor. “The reach of FactSet Research Systems Inc. ensures that the market will have access to AMERIBOR® benchmark interest rates. This will help the growth of AMERIBOR®-based loans, swaps, futures and other derivatives.”