Is There Room for AMERIBOR in a SOFR Future?

With the phase out of LIBOR just over a year away and the ARRC having identified the Secured Overnight Financing Rate (SOFR) as its preferred replacement for US dollar loans, it appears that the market has the guidance it needs to make the transition.

Not so fast, say some Main Street banks.  SOFR may work for much of the loan market and particularly larger banks that can borrow on a secured basis. However, this does not represent the reality for many smaller and regional banks, which often can borrow only on an unsecured basis. Using SOFR can lead to a mismatch between the borrowing risk that such banks take and the interest they can earn on their loans.

What are such banks to do?  Some of them have voiced their support for an alternative LIBOR replacement rate―the American Interbank Offered Rate (AMERIBOR).

What is AMERIBOR, and can it really be a viable alternative to SOFR?  We discuss those issues and more in our recent Alert published today, which can help you assess which LIBOR replacement rate works better for you.