Moving From LIBOR to SOFR

With the sunset of the London Interbank Offered Rate (LIBOR) and shift to the Secured Overnight Financing Rate (SOFR), financial institutions in the U.S. need to examine their portfolios, assess their exposure and create migration plans.

Long a widely used benchmark for short-term interest rates, LIBOR is set to be discontinued at the end of June 2023, and banks are encouraged to stop issuing LIBOR loans after December 2021. SOFR, the rate that will replace LIBOR in the U.S., offers several methodologies and configurations for accruing interest on loans. This point-of-view paper includes suggestions for employing the SOFR accrual methodologies, features and configurations and a LIBOR-to-SOFR migration checklist for those financial institutions with loans in their portfolio that will be affected.