The Alternative Reference Rates Committee (ARRC) has selected Secured Overnight Financing Rate (SOFR) as the replacement for LIBOR in the US. However, a group of US banks - primarily non-money centers have expressed concerns about the use of SOFR as the replacement benchmark for LIBOR. They argue that during times of economic stress, SOFR would decrease as their cost of funds increase, eroding the return on SOFR-linked loans. These banks have championed a more credit sensitive approach or a credit sensitive supplement to SOFR. In response, the New York Fed created a Credit Sensitivity Group and have convened four meetings of the group to date in 2020 to (i) understand of the challenges that banks of all sizes, and their borrowers, may face in transitioning loan products from LIBOR to SOFR and (ii) explore methodologies that consider a credit sensitive rate/spread that could be added to SOFR. Join Mayer Brown Partner Paul Forrester and Heidi Rudolph, Managing Director at Morae Global, as we discuss topics including: Why is there a need for credit sensitive rate? What are the "credit sensitive" alternatives to SOFR? How can banks use modelling techniques to identify, quantify and mitigate credit (?) exposures (and preserve their profit margins?) across their portfolios? How can banks ensure that these modelling techniques are transparent so that borrowers can anticipate and manage their borrowing cost?
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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
Visit us at mayerbrown.com
Mayer Brown is a global services provider comprising associated legal practices that are separate entities, including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England & Wales), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian law partnership) and non-legal service providers, which provide consultancy services (collectively, the "Mayer Brown Practices"). The Mayer Brown Practices are established in various jurisdictions and may be a legal person or a partnership. PK Wong & Nair LLC ("PKWN") is the constituent Singapore law practice of our licensed joint law venture in Singapore, Mayer Brown PK Wong & Nair Pte. Ltd. Details of the individual Mayer Brown Practices and PKWN can be found in the Legal Notices section of our website. "Mayer Brown" and the Mayer Brown logo are the trademarks of Mayer Brown.
© Copyright 2026. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
