IOSCO Statement on Alternatives to USD LIBOR

The IOSCO issued a statement regarding replacements to USD LIBOR which included warnings about the misuse of Term SOFR and Credit Sensitive Rates.

The board conducted a review of two credit sensitive rates (AMERIBOR and BSBY) and concluded they "exhibit some of the same 'inherent weaknesses' as LIBOR...absent modification, their use may threaten market integrity and financial stability."

While IOSCO had fewer concerns about Term SOFR, they warned that they were suitable for limited use only "so that these rates can remain sustainably available for limited appropriate use cases. If reference to Term SOFR rates were to become too widespread, at the expense of trading in the underlying SOFR derivatives (i.e., futures or swaps) markets, it would undermine the Term SOFR rates themselves."

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