LIBOR to SOFR

Stay Abreast of LIBOR Developments with AFS

The mandate that banks transition from their current use of LIBOR to the new daily rate approach SOFR by the end of 2021 has caused some upheaval in the industry. There are a lot of questions surrounding preparedness, system compatibility, and how SOFR will be calculated. 

As an active member of the ARRC Business Loan Working Group concerning the upcoming LIBOR transition, AFS is in a unique position to provide the latest updates on transition activities. Here, we provide answers to the some frequently asked questions, offer resources, and provide the opportunity to sign up for the AFS LIBOR Update email list.

LIBOR in Focus Newsletter

This newsletter offers further insight into this critical and monumental market change and help support your transition from LIBOR to Alternative Reference Rates. In this issue we will look at:
 

Being Prepared for All SOFR Scenarios Alternative Rates to SOFR ARRC Launches SOFR Term Rate ARRC Business Loans Working Group LIBOR Transition Best Practices Download this informative issue today.

LIBOR Transition Webinars

Amidst COVID-19 concerns, there are ongoing regulatory considerations that require attention. Through our direct involvement in the market and regulatory affairs for all segments of the commercial lending business, AFS has been at the forefront of the coming mandatory transition to SOFR, working closely with the ARRC and other industry leaders to provide clarifications on LIBOR and SOFR. Download and listen to past webinars.

Frequently Asked Questions

Are AFSVision and AFS Level III currently capable of supporting the transition?
YES! As of April 2021, AFS is the first (and only!) solution provider that can fully support all  four SOFR rate methods (including Credit Sensitive Spreads and Compounding Rate and Balance), as well as processing multiple alternative rates (ex., Ameribor, Bloomberg Short-term Bank Yield Index (BSBY), Fed Funds, and Prime Rate). 

When is LIBOR Going to end?
AFS is following guidance from the Alternative Reference Rates Committee (ARRC) that LIBOR will cease as of December 31, 2021. LIBOR might still be available, but not reliable. Why? Because some of the 16- to 20-bank panel will not be providing it to the Bank of England or the FCA. Meaning, the median they will be using to publish will be from a lesser group/number of banks. Therefore, some investors might easily think there could be potential for manipulation and reject the rate.

Does AFS offer any custom LIBOR Transition support?   
Yes, please contact Dean Snyder at DSnyder@afsvision.com or your RM to review your requirements.

What Rate is replacing LIBOR?
The ARRC selected the Secured Overnight Financing Rate (SOFR) as the recommended benchmark interest rate to be used in place of USD LIBOR. SOFR is an overnight, secured rate based on actual transactions in the repo market. It is considered to be risk free because its underlying transactions used to calculate the rate are secured by U.S. Treasury securities. 

However, banks are free to choose other rate methods (Ameribor, BSBY, Fed Funds, Prime Rate, etc.). AFS systems are ready to support and process any chosen rate method.

When will the SOFR rates be published?
On March 2, 2020, the Federal Reserve Bank of New York began publishing a compounded 30-Day, 90-Day and 180-Day Average SOFR. The SOFR Averages and Index

Data are available on the Federal Reserve Bank of New York’s  website at https://apps.newyorkfed.org/markets/autorates/sofr-avg-ind.

Additionally, daily SOFR in Arrears is available at https://apps.newyorkfed.org/markets/autorates/SOFR.

When does AFS anticipate providing the LIBOR Transition Change (Requirements) Documentation?   
User documentation is supplied as part of the code delivery.

Is there a timeline for the transition?
AARC has published a Paced Transition Plan that includes specific steps and timelines designed to encourage adoption of SOFR. 

If you have any LIBOR transition questions or concerns, please contact Dean Snyder at DSnyder@afsvision.com.