., the world’s largest banks and regulators world-wide are scheduled to abandon the short-term borrowing benchmark by year-end. But lenders have been slow to switch.
Earlier this week, Federal Reserve vice chairman of supervision Randal Quarles repeated earlier warningsif they didn’t stop using Libor on new transactions by the end of 2021. Chief financial officers at major U.S. corporations are still choosing between alternatives and few banks have begun to offer business loans linked to a new rate.
Loans tied to Libor have grown over the past year instead of dwindling. Around $223 trillion worth of contracts now reference Libor—which helps set borrowing costs on everything from business loans to mortgages—compared with $199 trillion at the end of 2016, according to the latest report from the Alternative Reference Rates Committee, a financial industry group made up of major banks, insurers and asset managers alongside the New York Fed.
The increase is one sign lenders have yet to fully embrace the Fed’s preferred replacement: the secured overnight financing rate, or SOFR. In another, roughly two-thirds of U.S. corporations surveyed by the ARRC that borrow money from large banks said they weren’t being offered alternatives to Libor.
Shame on those big banks for trying to protect their assets.
Hi