Putting Libor Out of Its Misery Is Proving Easier Said Than Done
- BIS says one-size-fits-all benchmark replacement is unlikely
- Alternatives for the U.S. include Bank Yield Index, Ameribor
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Weaning off the scandal-plagued Libor benchmark is a gigantic problem for global rates markets, one that increasingly looks too burdensome for a single replacement to handle in the U.S.
Global regulators decided to move away from the London interbank offered rate -- a vital part of the financial system given that it’s linked to, at last count, about $350 trillion of loans, derivatives and other instruments across various currencies -- after prosecutors found that banks around the world manipulated it. It also didn’t help that volumes underlying the benchmark dried up. For the U.S., a group backed by the Federal Reserve picked something called the Secured Overnight Financing Rate, or SOFR. It launched a year ago Wednesday.