The End of Libor: Seeking New Benchmarks

The London interbank offered rate (Libor), the world's dominant interest rate benchmark for the past 40 years, has come to an end. As regulators look for replacements, the authors argue against a one-size-fits-all approach and advocate for the development and adoption of multiple benchmarks in addition to the secured overnight financing rate (SOFR). They highlight the need for credit-sensitive benchmarks that reflect the borrowing costs of banks and everyday businesses, as well as benchmarks with longer terms. They believe that variety and choice in interest-rate benchmarks are essential for market performance and durability.