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LIBOR vs. SOFR: Big Changes Are Coming for U.S. Treasurers

Wednesday, February 13, 2019   (0 Comments)
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Buckle up, treasurers. The UK Financial Conduct Authority (FCA) has said that it no longer plans to compel banks to submit London Interbank Offered Rate (LIBOR) quotes past 2021. Once that happens, LIBOR will lose its status as the global interest rate benchmark and that title will likely be taken over by an Alternative Reference Rate (ARR).

Over the past several years, markets have begun to craft alternative rates that would effectively replace Interbank Offered Rates (IBORs). The Alternative Reference Rate Committee (ARRC) in the United States has selected the Secured Overnight Financing Rate (SOFR) for U.S. dollar derivatives and other financial contracts, and it is the heir apparent for loans. SOFR differs greatly from LIBOR, and that has major implications for corporate treasury. Continue reading...