Regulators and industry bodies have proposed and agreed on new interest rate benchmarks to replace LIBOR rates that are anticipated to no longer be published or supported past the end of 2021. These new Risk Free Rates will be broad reaching across all industries that use or invest in interest rate linked products, and affect a comprehensive set of financial instruments including fixed income securities, loans and derivatives.
The transition to these new rates will require significant efforts by institutions to address the impacts on business activities, client interactions, control processes, systems, risk management and financial performance. Organisations must begin now to prepare for and manage the transition.
The Secured Overnight Financing Rate (SOFR) was announced as the recommended USD LIBOR replacement in June 2017 and has since been adopted in select product areas (e.g., futures, floating rate notes), but the liquidity in the broader derivative and lending market is yet to fully materialize.
We explore the most likely transition scenario as well as potential strategies for using SOFR to price and risk manage both financial products and funding. We’ll also discuss its potential and the challenges faced in trying to introduce credit sensitive alternatives to LIBOR.
Listen to our podcast to find out how the LIBOR phase out could affect your company, the key accounting and reporting considerations, and recommendations for preparing for the transition.
|PwC’s established global network of specialists deeply understands key LIBOR-impacted businesses such as:|
|We work with you to provide support across the entire lifecycle of the transition, beginning with mobilization and governance, impact assessment, definition of remediation work streams, contract management and remediation, client outreach, systems & process changes, risk and valuation model changes, and managing related tax and accounting implications.|
Global Financial Services Leader, PwC US
Partner, PwC US
US Deals, Strategy & Operations Leader for Tax Reporting & Strategy, PwC US
Banking & Capital Markets, Principal, PwC US
Asset & Wealth Management, Partner, PwC US
Insurance, Partner, PwC US
Tel: +1 (646) 574 2159