BAFT, the American Bankers Association subsidiary association for international transaction banking, today released a frequently asked questions guide on the Libor transition.
The guide includes general questions about interbank offered rate transitions, information about the challenges of using risk-free rates and key issues regarding trade products referencing alternative reference rates. The guide currently focuses on the U.S. dollar and the U.K. pound but future updates will go into more depth on other rate transitions.
“This frequently asked questions guide provides timely information for trade finance practitioners who are preparing for the transition away from Libor,” said BAFT VP Diana Rodriguez. “The trade finance business has long stressed the imperative for a forward-looking term rate to ensure the uninterrupted provision of financing to support cross border trade. We were pleased to see the development of term SONIA in the U.K., which forged a clear path for the industry to transition. In the U.S., we are awaiting and closely tracking the ARRC’s plans to formally endorse a SOFR term rate and are evaluating the viability of other term rates solutions for the U.S. dollar.”