James Langton
With no clear candidate to replace U.S.-dollar LIBOR when the benchmark is eventually discontinued, market disruption remains a risk, says Fitch Ratings.
While most forms of LIBOR are slated to be discontinued by the end of the year, U.S. LIBOR has been given an extension until June 30, 2023.
In a new report, the rating agency said the slow transition away from the U.S.-dollar edition of the benchmark, with multiple possible alternative rates, “may increase disruption risk for banks and certain structured finance issuers at the start of 2022.”
Fitch said most large financial institutions are likely to adopt the Secured Overnight Financing Rate (SOFR) as a replacement, but that choice isn’t unanimous and the U.S. dollar debt market “appears destined toward a multi-rate environment.”
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