Powell: Ameribor ‘Fully Appropriate’ for Banks When It Reflects Cost of Funding

While the Federal Reserve continues to support the Secured Overnight Financing Rate as the Alternative Reference Rates Committee’s preferred alternative to the London Interbank Offered Rate, Fed Chairman Jerome Powell said that Ameribor is a “fully appropriate” alternative for banks when it reflects their cost of funds.

“We have been clear that the ARRC’s recommendations and the use of SOFR are voluntary and that market participants should seek to transition away from Libor in the manner that is most appropriate given their specific circumstances,” Powell said, answering a question for the record from Sen. Tom Cotton (R-Ark.) following a Senate Banking Committee hearing. “While [Ameribor] is a fully appropriate rate for the banks that fund themselves through the American Financial Exchange or for other similar institutions for whom Ameribor may reflect their cost of funding, it may not be a natural fit for many market participants.”

Ameribor is an IOSCO-compliant benchmark based on nearly $1 trillion in actual unsecured interbank transactions by AFX member institutions, which include regional, midsize and community banks.