Due to the need for software updates, several banks in Britain are struggling to make a self-imposed Libor transition deadline in October. While the October goal is self-imposed, the Financial Conduct Authority has told Reuters that an ignored deadline would be viewed negatively.
Open interest in one-month interest-rate futures tied to SOFR more than doubled between August and December, reaching about 375,000 contracts. Meanwhile, companies issuing new debt issued just $3.9 billion in SOFR-linked floating rate notes in December, less than one-tenth of similar issuance in August.
The Office of the Comptroller of the Currency (OCC) released its semiannual report, which flagged how banks’ efforts to keep up with rapid technological changes and the upcoming Libor transition might lead to looming risks for the industry.
On December 9th, SFA submitted comments to the Federal Reserve, Farm Credit Administration, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, and Office of the Comptroller of the Currency on their proposed changes to uncleared swap margin rules.
On November 25, SFA submitted comments to the IRS and Treasury regarding their proposed Guidance on the Transition from Interbank Offered Rates to Other Reference Rates. The proposal provides guidance on the tax consequences of the transition to the use of reference rates other than interbank offered rates (IBORs) in debt instruments and non-debt contracts.
At the House Financial Services Committee hearing on Thursday, December 5, Treasury Secretary Steve Mnuchin told lawmakers that the Treasury may need legislative help from Congress in ushering through the transition to the new interest rate benchmark.
Eurodollar futures, where nearly $3 trillion changes hands every day, are preparing for the end of Libor – the biggest shake-up they have had since they were introduced on the Chicago Mercantile Exchange (CME) in 1981.