1.22.20
Office of the Comptroller of the Currency (OCC) Director Joseph Otting announced on Wednesday that federal banking agencies are planning to launch a dialogue with private banks centered around establishing an alternative to LIBOR that would be suitable for loans. The announcement comes as some banks have warned that linking loans to the Secured Overnight Financing Rate (SOFR), the official alternative to dollar-based LIBOR, could have an impact on their long-term profitability if the US economy is hit with a recession. Some banks have expressed a desire for another option for products like business loans, commercial real estate loans and adjustable-rate mortgages that is more closely tied to their funding costs. “We’re just about ready to kick off an interagency process with the banks that will allow them to come together and start thinking about solutions along those lines,” Otting stated.
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