Have you heard about the recent LIBOR-SOFR changes? Here’s a short quote for a recent article by Wealth Management, ” The London Interbank Offered Rate (LIBOR) has been the global benchmark interest rate since the mid-1980s, and is the benchmark interest rate for roughly $350T of outstanding loans, mortgages, and securities. But banks will no longer be required to submit LIBOR quotes past 2021. After 2021 and likely before, LIBOR’s status as the global interest rate benchmark will be passed to its heir apparent—the Secured Overnight Financing Rate (SOFR).”
Keep reading below to learn more about this game-changing law.
In 2012, United Kingdom financial industry regulators discovered several financial institutions were manipulating the LIBOR rate-setting process for their own gain. Market participants were able to manipulate the rate because LIBOR is based on “expert judgment” as opposed to observable transactions. In response, the Federal Reserve
Board along with the Federal Reserve Bank of New York established best practices for creating an alternative benchmark to replace LIBOR. In June 2017, SOFR was presented as LIBOR’s replacement.
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