03.21.2022

US Passes Bill for Choice in Libor Replacements

03.21.2022
Basel Committee Consults on Interest-Rate Risk

The American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, applauds the passage of section 106 of the U.S. Omnibus Appropriations Bill that supports choice in selection of replacement benchmarks to suit the needs of individual banks, companies, and institutions.

Under section 106, the bill states that banks are free to choose a credit sensitive rate that is suitable for them, and that no regulator will be able to take negative action because of their choice of benchmark.

“We are pleased to see this important entry included in this bill,” Dr. Richard L. Sandor, AFX Chairman and CEO said. “All borrowers and lenders are not the same, capital market participants should be free to choose the benchmark best suited to their needs.  Both Credit sensitive and risk-free borrowing are important for an economy as varied and deep as the U.S. economy. We have long contended that choice in benchmarks provides a clear pathway for American banks and companies to take the best actions for their customers, shareholders and ultimately their bottom line.”

American banks are already benefiting from the flexibility that comes with benchmarks that reflect their cost of funding. Benchmarks are best chosen by the marketplace.

Currently the AFX has 229 members across the U.S. including 184 banks and 45 non-banks comprised of insurance companies, broker-dealers, private equity firms, hedge funds, futures commission merchants, and asset managers.

Source: AFX

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