The Fed said it would phase out LIBOR by June 2023

category:Finance
 The Fed said it would phase out LIBOR by June 2023


LIBOR is based on the average of the banks involved in overnight lending. The interest rate is crucial for the short-term funds used by financial institutions to operate, but it has been controversial for many years, especially its role in the 2008 financial crisis.

In addition to escalating the crisis by raising interest rates, LIBOR suffered another scandal in 2012. Some banks, including some of the worlds largest, manipulate LIBOR rates to make higher profits. The Fed has been warning banks to start preparing for the transition from LIBOR to the so-called secured overnight financing rate (sofr). Instead of relying on bank quotes, sofr uses interest rates on bank securities offered by investors, such as loans and bond backed assets. These announcements are a key step in an effort to promote an orderly phasing out of the dollar LIBOR, said New York Fed chairman John Williams Williams has been an advocate of sofr and has been urging banks to prepare for the transition. The sofr deal will take place under the auspices of the New York Fed bond repo market. Source: Wall Street news editor: Wang Xiaowu_ NF

The Fed has been warning banks to start preparing for the transition from LIBOR to the so-called secured overnight financing rate (sofr). Instead of relying on bank quotes, sofr uses interest rates on bank securities offered by investors, such as loans and bond backed assets.

Williams has been an advocate of sofr and has been urging banks to prepare for the transition. The sofr deal will take place under the auspices of the New York Fed bond repo market.