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ARTICLE · 15 OCTOBER 2021

LIBOR Transition: Drama Continues For BSBY

Duane Morris LLP
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Unless regulators back up their words with actions, this drama is mostly noise, and lenders are free to continue to make BSBY loans.

United StatesFinance and Banking
Phuong (Michelle) Ngo
Phuong (Michelle) Ngo
Roger S. Chari
Roger S. Chari
Joel Ephross
Joel Ephross
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As Bloomberg and banks like Bank of America in the US and DBS Bank in Singapore continue to push forward with BSBY, IOSCO last month rattled its saber with a statement on credit sensitive rates, highlighting the importance of choosing alternative financial benchmarks that are compliant with the IOSCO Principles. The last volley in the continuing back and forth between regulators and proponents of new credit sensitive rates came in July, when Bloomberg tried to address some of the volume and manipulation concerns raised by SEC Chair Gary Gensler and others with BSBY.

The IOSCO statement counters that with a caution that IOSCO compliance is not a one-time test, and even if trading volumes are sufficient for current volumes of loans in such benchmarks, loan volume should not be permitted to grow if it outpaces increases in underlying trading volumes and are unable to be resilient. BSBY is not mentioned by name, but it has been the primary subject of attention.

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