What You Need to Know
- Rep. Brad Sherman, D-Calif., introduced a bill to make SOFR the default alternative for financial contracts.
- The American Council of Life Insurers supports the bill.
- Members of the House Financial Services Committee approved it by a voice vote.
The American Council of Life Insurers (ACLI) is supporting a bill that could affect what happens to many U.S. financial contracts when Libor — the London Interbank Offered Rate — goes away.
The bill, H.R. 4616, would make SOFR — the Secured Overnight Financial Rate — the default alternative for financial contracts that include no provisions for coping with the death of Libor.
Rep. Brad Sherman, D-Calif., introduced the bill July 22.
The bill has no co-sponsors, but members of the House Financial Services Committee approved a revised version at a meeting last week by a voice vote.
Libor and SOFR
Banks in London developed Libor in the 1980s. Libor serves as a base rate for calculating the variable rates used in loan contracts and other contracts.
Libor affects rate calculations for about $200 trillion in outstanding U.S. contract value.