Libor’s Delayed Demise Rewards Slow-Moving U.S. Bankers
Why switch to the alternative if regulators will keep moving the goalposts?
Time is relative.
Photographer: Scott Olson/AFP/Getty Images
When it comes to overseeing Wall Street, regulators must know that if they give an inch, banks and other large financial institutions will take a mile.
That’s part of the reason the years-long global effort to phase out the London interbank offered rate by the end of 2021 has been both impressive and nerve-wracking. On the one hand, the world’s policy makers have had more than three years to develop and adopt alternative lending benchmarks to replace Libor, which as of 2018 was tied to some $400 trillion of financial contracts. And yet, as recently as October, or roughly 14 months before Libor’s supposed demise, financial markets were spooked by the prospect of a “big bang” shift on interest-rate swaps to the top U.S. alternative: The secured overnight financing rate, or SOFR, which has gained some traction but is still just a sliver of Libor’s reach.