For decades, the London Interbank Offered Rate (LIBOR) was the ubiquitous benchmark rate used by lenders across financial markets to set rates on everything from derivatives to mortgages and business loans. However, LIBOR’s reputation came under fire during the financial crisis of 2008, and led to a search for alternatives. Publication of many LIBOR rates has already ended, and publication of the remaining five USD LIBOR tenors is scheduled to cease on June 30, 2023.
In a new white paper, Brattle Principal Ioannis Gkatzimas, Senior Associate Ryan Leary, and Research Analyst Musa Isani examine the transition away from USD LIBOR in the US market, detailing USD LIBOR’s downfall and the emergence of its recommended replacement, the Secured Overnight Financing Rate (SOFR). They also discuss a few market-based alternatives to SOFR, the initiatives and legislation designed to address challenges associated with the USD LIBOR transition, and the economic considerations for potential litigation that could arise related to the transition.
The full white paper, “From USD LIBOR to SOFR: A Look at LIBOR’s Exit, SOFR’s Ascendance, Emerging Alternatives, and Economic Considerations for Litigation,” is available below.