Randal Quarles, vice-chairman of the Federal Reserve, reminded market participants that they should stop using the London interbank offered rate (Libor) by the end of the year and warned that the Fed would regulate companies accordingly.
"there is no more time and banks will not be able to use Libor after the end of the year, no matter how dissatisfied they are with the option to replace it," the vice chairman of regulation said in a prepared speech at a meeting of the structured Finance Association in Las Vegas on Tuesday. "given that SOFR can be used, there is no reason for banks to continue to use Libor after 2021."
With about 12 weeks to go before the deadline for abandoning Libor at the end of the year, new reference rate providers are also competing fiercely for a piece of the post-Libor market. The 1-cycle and 2-month Libor will end, but the Libor quote will last until June 2023, but only for the remaining contracts.
"the use of these quotations in new contracts poses security risks to counterparties and the financial system," Quarles said.
Real estate lender Walker & Dunlop Inc. On Tuesday first announced a U.S. leveraged loan issue that fully supports SOFR, a milestone in breaking away from Libor and could eventually trigger a lot of imitation.