Preparing for the Discontinuation of LIBOR and Transition to SOFR
May 2, 2019 GFOA Newsletter
On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop compelling banks to submit London Interbank Offered Rates (LIBOR) by the end of 2021. The New York Fed has started publishing the Secured Overnight Financing Rate (SOFR), a new reference rate based on overnight loans collateralized by U.S. Treasuries. SOFR is the anticipated replacement for the LIBOR index. GFOA recommends governments assess your overall LIBOR exposure and begin conversations with your partners on a process to address the cessation of LIBOR.
In prepared comments to the Financial Stability Board on April 10, GFOA Past President Patrick J. McCoy emphasized that clarity and process for both the issuer and the investor as very important in the expected transition. Additionally on April 15, at a convening of the Fixed Income Market Structure Advisory Committee, Mr. McCoy provided comments on behalf of GFOA, adding limiting ‘unknowns’ is especially important to the public markets where we promote transparency to ensure that investors have appropriate material information about municipal securities.