Banks reject SOFR in Fed’s Covid lending schemes

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Banking groups have criticised US plans to benchmark emergency loans made to businesses during the Covid-19 pandemic to the secured overnight financing rate, or SOFR, instead of the more commonly used Libor.

Both the American Bankers Association (ABA) and the Bank Policy Institute (BPI) said in separate comment letters last week that the Federal Reserve should allow lenders to use Libor as the reference rate for these loans – with fallback language to SOFR inserted in the event Libor ends

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