How the LIBOR Transition Affects the Supply of Revolving Credit

Darrell Duffie, Cooperman Harry, Alena Kang-Landsberg, Stephan Luck, Zachry Wang () and Yilin Yang ()
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Zachry Wang: https://profiles.stanford.edu/zachry-wang
Yilin Yang: https://www.gsb.stanford.edu/programs/phd/academic-experience/students/david-yilin-yang

No 20230203, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In the United States, most commercial and industrial (C&I) lending takes the form of revolving lines of credit, known as revolvers or credit lines. For decades, like other U.S. C&I loans, credit lines were typically indexed to the London Interbank Offered Rate (LIBOR). However, since 2022, the U.S. and other developed-market economies have transitioned from credit-sensitive reference rates such as LIBOR to new risk-free rates, including the Secured Overnight Financing Rate (SOFR). This post, based on a recent New York Fed Staff Report, explores how the provision of revolving credit is likely to change as a result of the transition to a new reference rate.

Keywords: bank funding risk; reference rates; LIBOR; SOFR; Secured Overnight Financing Rate (SOFR); credit supply; regulation (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2023-02-03
New Economics Papers: this item is included in nep-ban
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