10.12.18
Quiet Revolution Takes Hold in Global Finance with LIBOR's Days Numbered
by: Victoria Guida
The world financial system is going through a quiet revolution that will affect everything from complicated derivatives to everyday mortgages. Now experts are hoping more financial actors will start planning for the day when LIBOR might no longer exist. “This is one of the largest changes we've ever seen in financial infrastructure, if not the largest,” said David Bowman, the Federal Reserve Board's resident expert on LIBOR, at an event hosted by the Bipartisan Policy Center. The Fed has developed an alternative rate known as the Secured Overnight Financing Rate, or SOFR, as an alternative to the U.S. dollar LIBOR, but the transition isn't simple. For one, financial institutions have to make sure they're comfortable enough with how SOFR acts to base new contracts on its fluctuations. Meanwhile, there's a huge question about how to handle existing contracts that reference LIBOR and don't have a clear answer about what would happen if LIBOR ceased to exist.
Read the full article on Politico Pro