Axios interviewed Matt Hoffman about banks pulling away from LIBOR
- June 3, 2021
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.
Choice 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.
LIBOR Transition Risk Assessment
Chatham has built an internal task force of AI experts, legal counsel, and commercial real estate consultants who have trained a suite of AI models to review and analyze your loan documentation and identify exposure to LIBOR accurately and efficiently. This custom AI-driven approach is only possible through Chatham's unrivaled access to a variety of private market, non-public CRE documentation on which to train the AI.
After analyzing your entire portfolio, Chatham will provide a comprehensive analysis of your firm’s exposure to LIBOR, along with specific and actionable recommendations to support an efficient transition to a new index.
Our featured insights
USD LIBOR transition: credit-sensitive fallback rates
With more and more talk of various credit-sensitive alternatives to USD LIBOR, we’ve prepared an overview of some of the leading credit-sensitive alternative benchmarks (e.g., AMERIBOR, BSBY, et al.). We discuss what market events led to the current state, provide a comparison of the leading...
FAQ: GBP LIBOR transition to SONIA
GBP LIBOR will transition to SONIA, likely by the end of 2021. Chatham's experts answer the most pressing questions asked by our clients about how the transition will affect them.
FAQ: USD LIBOR transition to SOFR
USD markets started transitioning from LIBOR to SOFR in 2017 after the FCA announced that LIBOR was at risk of discontinuation at the end of 2021. Chatham’s experts answer the most pressing questions asked by our clients about how the transition will affect their port.
LIBOR transition in the UK — an unexpected first date with SONIA?
“Moving on” from LIBOR, an interest rate benchmark which underpins around $300T ($30T in GBP markets)1 of financial contracts across derivatives, bonds, and loans was never going to be easy. Last month we, in the U.K., started to experience what life after LIBOR will look like...
LIBOR transition update — Q1 2021 review
Chatham’s update on the LIBOR transition, summarizing recent news, transaction activity, and upcoming deadlines to help you stay current as the market transitions away from LIBOR.
2021 ISDA Interest Rate Derivatives Definitions
ISDA’s Benchmark Reform Working Group is in the process of updating the 2006 ISDA Definitions to include a modular approach towards term rate calculations. ISDA’s modifications to their Definitions would allow market participants to better align their derivatives with the conventions employed in their cash products.
Chatham's Brittany Jervis explains to NeuGroup how the FASB offers corporates operational relief in the LIBOR transition
The Financial Accounting Standards Board (FASB) started 2021 by clarifying accounting guidance aimed at facilitating the transition of corporate floating-rate transactions away from the LIBOR reference rate. Brittany Jervis spoke with NeuGroup Insights about how the FASB's ASU 2021-01 and the...