Market still puzzling over Libor as sunset nears

Some in the market still do not see eye to eye on Libor transition even with the cessation of the benchmark at the end of 2021 fast approaching.

Request a PDF

In several panels focused on Libor transition on Monday, panelists went over details that still needed sorting out before the market can successfully transition to Sofr, the benchmark recommended by the Alternative Reference Rates Committee (ARRC). However, some said during the talks that new rate may not be a one size fits all solution.

“I think what we saw in 2019 did not include the full embrace of Sofr or a wholesale adoption of it, but a market that began considering Sofr,” said Claire Hall, partner at DLA Piper. “And maybe that reticent approach is perhaps the right approach - Sofr may not be the right or only benchmark.”

Ameribor is an alternative, promoted by the American Financial Exchange and floated as a way to address the need for an interbank market between regional banks that might not borrow over either Libor or Sofr, according to Richard Sandor, chairman and chief executive officer of the AFX. 

If there’s one thing all industry leaders including the ARRC and the FHFA do agree on, it’s that investors and issuers need to be prepared and start the transition process as soon as possible.

“I don’t encourage anyone to sit and wait,” said Susan Hughes, cash products lead at Wells Fargo’s Libor transition office. “Be prepared, review your contracts and know your positions.”