As SOFR Gains Favor, Other Benchmark Rates Face Uncertain Future
With the lights almost out on the scandal-plagued Libor interest rate, a successor touted by regulators has quickly become the leading benchmark for business loans, outdueling two alternatives that some banks prefer.
The Secured Overnight Financing Rate, or SOFR, has taken an early lead partly because regulators see it as a stable interest-rate benchmark without the vulnerabilities of Libor. The London interbank offered rate is being phased out globally after a manipulation scandal years ago.
Banks’ rapid adoption of SOFR makes 2022 a critical year for the two leading alternatives in the United States: the Ameribor rate favored by some midsize lenders and Bloomberg’s BSBY rate, which has gotten traction among other regional and larger banks.
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