<code id="izrdx"></code>
<code id="izrdx"><u id="izrdx"></u></code>
<var id="izrdx"></var>
  • <label id="izrdx"><legend id="izrdx"></legend></label>

  • <acronym id="izrdx"></acronym>
  • <var id="izrdx"></var>
  • <cite id="izrdx"></cite>
    <dl id="izrdx"><legend id="izrdx"><blockquote id="izrdx"></blockquote></legend></dl>

    Libor goes from dying to in demand with Fed pushing fast loans

    Register now

    Regulators on both sides of the Atlantic have spent the better part of three years trying to kill the London interbank offered rate. Now, they're looking to it once again to underpin hundreds of billions of dollars in loans as they seek to rescue their economies.

    U.S. policymakers last week changed tack and turned to Libor as the benchmark for their $600 billion Main Street Lending Program, which will buy debt from potentially hundreds of companies. The move came a day after U.K. officials granted banks a six-month extension to keep issuing loans tied to the beleaguered reference rate, which is supposed to be phased out by the end of 2021.

    The timetable to do away with the benchmark linked to trillions of dollars of financial assets appears increasingly at risk as central bankers lean on Libor to help expedite their massive stimulus efforts. As they lend legitimacy to the much-maligned rate, some market watchers say it's highlighting the shortcomings of replacements, while others note it could ultimately lead to a more difficult transition down the road.

    "The crisis does make it tougher and it will put a lot more time pressure on meeting the deadline," said Darrell Duffie, a finance professor at Stanford University who has written extensively on Libor. He called the Fed's decision, while necessary, "very unfortunate" and a missed opportunity to pivot away from the benchmark, adding that it's a sign that U.S. lenders "were not getting ready" for the transition.

    SOFR troubles

    For their part, the banks planning to participate in the facility argue that rapidly implementing new systems to issue loans based on the Fed's preferred replacement — the Secured Overnight Financing Rate — would have diverted resources from other challenges related to the COVID-19 pandemic.

    The switch from SOFR to Libor was a "practical consideration, because these programs are designed to quickly disperse funds in unprecedented environments to those in need," Tom Wipf, chairman of the Fed-backed Alternative Reference Rates Committee overseeing the Libor transition in the U.S., said in a statement last week.

    Yet some say the reversal shines a light on critical deficiencies in SOFR.

    These include the lack of a term structure, absence of a credit component and susceptibility to periodic volatility in the market for repurchase agreements that determine the benchmark's setting.

    "SOFR alone would be a terrible lending index," said John Coleman, senior managing director of the fixed-income group at R.J. O'Brien & Associates in Chicago. "Libor is terrible because it acts in a dysfunctional way because nothing trades in it. What used to be good isn't really working and what's supposed to be replacing it isn't really working."

    Three-month Libor slid to 0.474% Tuesday, the lowest since 2015, while SOFR last set at 0.05%.

    The Fed's decision to rely on Libor follows a similar move in the U.K., where policy makers are leaning on the rate to help pump emergency funds to businesses ravaged by the outbreak. Banks can now issue Libor-linked loans through the end of March 2021 after the Financial Conduct Authority pushed back the drop-dead date from the end of September.

    "People are significantly distracted with things like getting their heads around emergency funding schemes to keep businesses afloat," said Paul Mullen, a partner at the law firm Hogan Lovells in London. That's "diverting resources away from thinking about Libor transition."

    End near?

    As the focus switches to whether regulators will ultimately push back the 2021 deadline, both U.S. and U.K. officials have remained steadfast. Still, they acknowledge that certain near-term goals and milestones will undoubtedly be missed.

    That could make ditching the ubiquitous reference rate that much harder. Loans via the Fed's Main Street Lending facility will have a four-year maturity, taking them well beyond the 2021 cutoff point.

    While policymakers are reminding lenders and borrowers to include fallback language in new Libor-based contracts, the decision will ultimately mean billions of dollars of additional debt that will need to be transitioned to a new benchmark.

    "The overall effect will be to create a large volume of new Libor-linked products, potentially exposing all parties participating in the loans to the risks inherent in renegotiating the switch," said Rupert Lewis, head of banking litigation at Herbert Smith Freehills LLP in London.

    Bloomberg News
    澄海| 郫县| 垦利| 帕里| 庄浪| 盂县| 伊和郭勒| 伊和郭勒| 楚雄| 鲁山| 南宁| 金湖| 潼南| 黄骅| 徐州农试站| 彝良| 易县| 柘城| 湟源| 淖毛湖| 长岛| 巴彦诺尔贡| 太谷| 正定| 牟定| 临安| 巨鹿| 兴安| 宜黄| 朝阳| 如东| 昭通| 民丰| 南涧| 舍伯吐| 商都| 中心站| 陵川| 银川| 都江堰| 同心| 东至| 正宁| 合阳| 奉节| 黄平| 威海| 新会| 靖江| 平果| 叶城| 双峰| 拐子湖| 丹凤| 福鼎| 洪江| 陇川| 岑溪| 陆良| 理县| 新巴尔虎右旗| 凤台| 野牛沟| 钟山| 大冶| 武川| 尤溪| 肃宁| 怀远| 双城| 阳高| 通许| 上饶县| 黄冈| 冷水滩| 岳池| 柞水| 鄂伦春旗| 怀仁| 易县| 藤县| 常德| 丹徒| 乌审召| 灌云| 巴林右旗| 九龙| 太仓| 龙江| 茌平| 浦口| 罗甸| 新民| 大名| 巨野| 商河| 华县| 平顺| 敖汉旗| 南澎岛| 庆云| 塔河| 简阳| 曲麻莱| 龙里| 若羌| 瓮安| 平谷| 吐鲁番东坎| 宣恩| 和龙| 太原北郊| 南澳| 乌审召| 开平| 葫芦岛| 屏边| 会理| 星子| 一八五团| 宁海| 哈密| 新竹县| 高碑店| 大通| 苏家屯| 宁晋| 兴宁| 潞城| 茶卡| 马鞍山| 宿迁| 兴宁| 马山| 潞西| 晋宁| 犍为| 休宁| 滁州| 临邑| 正镶白旗| 察哈尔右翼后旗| 曲江| 泰兴| 东丰| 五峰| 汉沽| 灵台| 永福| 沂源| 镇江| 上饶县| 卢氏| 宁都| 上思| 灌阳| 柳州| 英德| 鹤城区| 东阳| 于田| 雄县| 若尔盖| 阿合奇| 隆回| 隰县| 城步| 成安| 望谟| 盘山| 鹤壁| 石棉| 察哈尔右翼后旗| 淄川| 永宁| 绥阳| 宝坻| 百色| 新丰| 衡阳县| 胡尔勒| 当涂| 帕里| 苏尼特右旗| 丰县| 平定| 永署礁| 泰来| 潞江坝| 郁南| 阿瓦提| 黄龙| 沅江| 佳木斯| 宁冈| 昆明| 青冈| 魏县| 石家庄| 寿宁| 衡阳| 滑县| 托克逊| 临安| 山南| 金山| 常熟| 阿拉善左旗| 冷湖| 万盛| 新源| 赤水| 岫岩| 循化| 福州郊区| 林口| 涞水| 巴林右旗| 兴山| 禹州| 新郑| 伊吾| 吉兰太| 吕泗| 深泽| 仁和| 阿拉山口| 苏尼特左旗| 丹徒| 佛爷顶| 南华| 宣化| 广河| 南溪| 郁南| 秀山| 开鲁| 呼伦贝尔| 英吉沙| 潞江坝| 景县| 宁安| 镇康| 黄山区| 垫江| 乐安| 聂拉木| 巩留| 连州| 原阳| 景东| 山阳| 马祖| 渝北| 天镇| 盐池| 玉山| 株洲县| 怀仁| 岚县| 漳县| 宝鸡| 乌拉特前旗| 黎川| 合水| 留坝| 德保| 峨山| 临安| 舍伯吐| 兴隆| 厦门| 新巴尔虎右旗| 怀柔| 汝阳| 凯里| 伊克乌素| 云和| 攀枝花| 神池| 阿荣旗| 大方| 壤塘| 都匀| 南部| 汉川| 宝丰| 白云鄂博| 满洲里| 察哈尔右翼后旗| 鸡公山| 濮阳| 盘锦| 柘荣| 开鲁| 桐柏| 汨罗| 依安| 延川| 涟水| 六枝| 筠连| 北京| 宜君| 土默特右旗| 霍邱| 淅川| 安丘| 胡尔勒| 阿图什| 陵县| 魏山| 南阳| 万州龙宝| 自贡| 黄陵| 江夏| 克东| 黄龙| 黄冈| 福贡| 硕龙| 台北县| 乌鲁木齐牧试站| 阿巴嘎旗| 霍邱| 常熟| 肃南| 博兴| 宁安| 融安| 常州| 雄县| 罗定| 阿瓦提| 永清| 石城| 图里河| 金川| 顺平| 中牟| 都匀| 延庆| 穆棱| 塞罕坎| 白银| 崆峒| 南阳| 和布克赛尔| 白玉| 平坝| 温泉| 平遥| 清远| 建湖| 塔河| 西吉| 阿拉善右旗| 塘沽| 温县| 营山| 乌海| 商洛| 建始| 思南| 维西| 吉林| 建平县| 安康| 和丰| 蒲县| 敦化| 镇雄| 新宁| 台前| 乌拉盖| 南沙岛| 石阡| 洋县| 贺州| 贵南| 晋宁| 府谷| 漯河| 景洪| 四子王旗| 宣恩| 安龙| 龙门| 上海| 巧家| 镇沅| 温江| 来凤| 塔城| 徐水| 阿坝| 墨竹贡卡| 承德县| 巴中