U.S. Financial Regulators Push Banks to Transition Away from Libor -- Update
By Andrew Ackerman and Dave Michaels
WASHINGTON -- Top U.S. financial officials on Friday pressed
banks to stop using the London interbank offered rate on new
transactions by the end of 2021, warning that firms aren't moving
swiftly enough to replace the benchmark for hundreds of trillions
of dollars in financial contracts.
Treasury Secretary Janet Yellen and other top officials pressed
the issue at a meeting of the Financial Stability Oversight
Council, a group that monitors the stability of the financial
"We are at a key inflection point," Randal Quarles, the Fed's
point person on financial regulation, said at the meeting. "The
deniers and the laggards are engaging in magical thinking. Libor is
The exhortations amount to the strongest and clearest guidance
yet from top policy makers about the risks to banks for writing new
contracts based on Libor. The benchmark is scheduled for
replacement at the end of 2021 in the wake of a manipulation
Rather than dwindling as regulators have urged, loans tied to
Libor have grown to around $223 trillion this year compared with
$199 trillion at the end of 2016, according to a March report from
the Alternative Reference Rates Committee, a financial industry
group made up of major banks, insurers and asset managers alongside
the Federal Reserve Bank of New York.
The increase is one sign lenders have yet to fully embrace the
Fed's preferred replacement: the Secured Overnight Financing Rate,
or SOFR. While large banks and mortgage lenders like Fannie Mae
have started actively using the benchmark, some large U.S.
corporations and other borrowers held off, seeking a benchmark that
could fix rates over longer time spans.
Write to Andrew Ackerman at email@example.com and Dave
Michaels at firstname.lastname@example.org
(END) Dow Jones Newswires
June 11, 2021 16:18 ET (20:18 GMT)
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