Banks Weigh Alternatives to Libor Replacement as Companies Seek Longer-Term Rates Summary: Some big banks are evaluating
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Question:
Banks Weigh Alternatives to Libor Replacement as Companies Seek Longer-Term Rates
Summary:Some big banks are evaluating if the reference rate that is backed by regulators as the best replacement for the scandal-plagued London interbank offered rate is the only option for companies, or if they should offer other rates. Many large U.S. financial institutions are providing the Secured Overnight Financing Rate, or SOFR, to corporate borrowers as part of the transition away from Libor. But SOFR may not cover all companies' needs, banks and corporate advisers say, because the benchmark lacks rates that are weeks or months in the future, making it hard for companies to plan around future interest-rate risk.
Questions:
- Why is Libor being phased out as a reference rate?
- What is SOFR?
- Discuss the alternative rates to Libor such as Ameribor, SOFR, and BSBY. What are they and why are there differences in the three-month rates for each referenced in the article?
- What are the views of the Fed and SEC in relation to alternatives to Libor being considered by various banks?
Expert Answer:
1 Why is Libor being phased out as a reference rate Libor the London Interbank Offered Rate has been plagued by scandal and manipulation concerns over the years Regulators found that banks were falsel... View the full answer
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