November 14, 2021
Markets

LIBOR: The End is Nigh (Really!) | Snell & Wilmer

LIBOR—the London Inter-bank Offered Rate—has been a key interest rate benchmark in commercial lending since the 1980s. LIBOR is derived from the interest rates at which major banks would lend to each other on a short-term unsecured basis. In the aftermath of the Great Recession, however, concerns surfaced over possible manipulation of the process for setting LIBOR, as well as whether the inter-bank lending market continued to be sufficiently robust. As a result, some lenders, regulators, and other participants concluded that LIBOR was not only potentially unreliable, but could even become unavailable, particularly in times of economic stress. As SEC Chair Gary Gensler recently put it, LIBOR had become “something akin to an inverted pyramid” where a massive financial market rested on very few underlying transactions.

In response to those issues and to address the risk of…

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