Libor trap lurks in 2021 US stress tests
Using SOFR, borrowing could boom and revenues collapse
As Libor’s likely demise approaches, banks are fretting over how to model the adoption of replacement risk-free rates in next year’s round of US regulatory stress tests.
During March’s coronavirus-related economic shock, the spread between US dollar Libor and the secured overnight financing rate, SOFR, blew out. If a similar dislocation was applied in the 2021 stress test, banks would suffer a sudden drain in liquidity as borrowers tap into credit lines at rock-bottom rates. Meanwhile, an
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Risk management
7 days in 60 seconds
Behavioural finance, alt data and risk-free rate problems
The week on Risk.net, June 27–July 3, 2020
Receive this by email