Leaving La Vida LIBOR or SOFR so good? LIBOR will cease in 2021. Are you prepared?
As if the current economic markets were not already volatile and uncertain enough, a new problem is looming on the horizon. The end of 2021 will also mark the end of the London Interbank Offered Rate (“LIBOR”), which is the benchmark not only for banks’ short-term transactions but for banks, corporations, and other entities for determining interest rates in various financial transactions and contracts. LIBOR has been the standard for setting interest rates in commercial contracts for over fifty (50) years when it was used in 1969 by J.P. Morgan in an $80,000,000.00 transaction as the basis for the interest rate. There are varied reasons for LIBOR’s demise, but it largely stems from the 2008 market meltdown when LIBOR’s rates were manipulated. While banks and financial institutions are not required to use LIBOR, most do because of its history, the manner that it is calculated, and to ensure uniformity not […]Continue Reading