The End of Libor: A New Era for Benchmark Rates
The financial system's reliance on the London Interbank Offered Rate (LIBOR), a tarnished interest-rate benchmark, is coming to an end after a decade-long process. LIBOR, which underpinned trillions of dollars in contracts globally, will cease to be published from next week. It was replaced by the Secured Overnight Financing Rate (SOFR) in the United States. The transition away from LIBOR has been a massive effort, with significant fines imposed on the financial industry for manipulating the benchmark. While most contracts have shifted to SOFR, some loans still tied to LIBOR remain, posing challenges for borrowers. British regulators have published a rate that mimics LIBOR until September 2024 to avoid market disruptions.