Smaller US banks make case for credit-sensitive rates

BSBY and Ameribor emerge as preferred Libor successors for some regional lenders in multi-rate approach

It’s decision time for US banks, which must now ditch Libor in new contracts by regulatory diktat.

While the world’s largest financial institutions have adopted the secured overnight financing rate (SOFR) – regulators’ preferred Libor successor – for many activities, smaller banks have shown a preference for credit-sensitive benchmarks.

Many worry that relying solely on a risk-free rate (RFR) like SOFR would leave them exposed if a tightening credit cycle lifts their own borrowing costs

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