How the LIBOR Transition Affects the Supply of Revolving Credit
In the United States, most commercial and industrial (C&I) lending takes the form of revolving lines of credit, known as revolvers or credit lines. For decades, like other U.S. C&I loans, credit lines were typically indexed to the London Interbank Offered Rate (LIBOR). However, since 2022, the U.S. and other developed-market economies have transitioned from credit-sensitive reference rates such as LIBOR to new risk-free rates, including the Secured Overnight Financing Rate (SOFR). This post, based on a recent New York Fed Staff Report, explores how the provision of revolving credit is likely ...
537 Days: Time Is Still Ticking
Remarks at LIBOR: Entering the Endgame (a webinar hosted by the Bank of England and the New York Fed) .
Remarks at Securities Industry and Financial Markets Association (SIFMA), New York City.
A Resolution for 2021: No New LIBOR
Remarks at the Securities Industry and Financial Markets Association’s LIBOR Transition Forum (delivered via videoconference).
SOFR and the transition from LIBOR: remarks at the SIFMA C&L Society February Luncheon, New York City
Remarks at the SIFMA C&L Society February Luncheon, New York City.
Restoring confidence in reference rates
Remarks at the Salomon Center for the Study of Financial Institutions, New York University Stern School of Business, New York City.
LIBOR: The Clock Is Ticking
Remarks at the 2019 U.S. Treasury Market Conference, Federal Reserve Bank of New York, New York City.
Measure Twice, Cut Once
Remarks at SOFR Symposium: The Final Year (Part II) (delivered via videoconference).
Investigating the Proposed Overnight Treasury GC Repo Benchmark Rates
In its recent ?Statement Regarding the Publication of Overnight Treasury GC Repo Rates,? the Federal Reserve Bank of New York, in cooperation with the U.S. Treasury Department?s Office of Financial Research, announced the potential publication of three overnight Treasury general collateral (GC) repurchase (repo) benchmark rates. Each of the proposed rates is designed to capture a particular segment of repo market activity. All three rates, as currently envisioned, would initially be based on transaction-level overnight GC repo trades occurring on tri-party repo platforms. The first rate would ...
Bank Funding Risk, Reference Rates, and Credit Supply
Corporate credit lines are drawn more heavily when funding markets are more stressed. This covariance elevates expected bank funding costs. We show that credit supply is dampened by the associated debt-overhang cost to bank shareholders. Until 2022, this impact was reduced by linking the interest paid on lines to credit-sensitive reference rates such as LIBOR. We show that transition to risk-free reference rates may exacerbate this friction. The adverse impact on credit supply is offset if drawdowns are expected to be left on deposit at the same bank, which happened at some of the largest ...