Axios interviewed Matt Hoffman about banks pulling away from LIBOR
Summary
Matt Hoffman explains to Axios why some banks may be planning their move away from LIBOR to another credit-sensitive rate by the end of this month.
AxiosChoice can be good. But a multi-benchmark environment would mean borrowers have to weigh a host of pros and cons each time they borrow — potentially without a perfect solution for all cases, Hoffman says.
Why it matters: Banking regulators have been trying to phase out Libor since a 2008 rate-manipulation scandal, but it is still widely used in the U.S. The long transition has given rise to multiple replacement options, leaving borrowers and investors in limbo when making certain investment decisions.
Context: More than $200 trillion in global debt is currently Libor-based.
What’s new: “We're aware of one bulge bracket bank that has indicated an intention to stop offering their borrowers new Libor-based instruments after June 30 of this year,” Matt Hoffman, director at financial risk advisor Chatham Financial, tells Axios.
Of note: The bank in question said it prefers to move to BSBY (Bloomberg Short-term Bank Yield Index) as an alternative, but is willing to quote over SOFR (Secured Overnight Funding Rate), Hoffman says.
- “We've heard from others active in our space that more banks are considering doing the same, and that we can expect to know more in coming weeks,” Hoffman adds.
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