SOFR is not the only Libor-replacement game in town. At a press briefing given last week by American Financial Exchange (AFX), the exchange that introduced the Ameribor benchmark, former CFTC Chairman Chris Giancarlo said that with the U.S.’s diverse economy, more than one benchmark is needed to replace the Libor, and Ameribor may be more appropriate for small, medium-sized and regional banks. Tom Broughton, an AFX member and the CEO of ServisFirst Bank, said Ameribor was “the only benchmark appropriate for a bank,” adding, “We looked at SOFR as a benchmark – it’s just not appropriate for a bank of any size.” He said the transition at ServisFirst from Libor to Ameribor was “seamless.” Barbara Novick, one of the co-founders of BlackRock, said that “with the two types of rates out there, you have to look at the use case, the composition and construction…Ameribor is transaction based and very transparent.”
Last week the Alternative Reference Rates Committee (ARRC) backed the term rate created by CME Group based on SOFR to replace Libor. But Giancarlo, who is an independent director at AFX, wrote an opinion piece recently for American Banker titled “Libor is dead. Long live choice,” in which he said that Ameribor, created by Richard Sandor, the AFX’s chairman and chief executive, should be one of the alternatives to the “irredeemably tarnished” Libor. In the opinion piece, Giancarlo wrote, “For many banks big and small, a credit-sensitive benchmark like Ameribor can play a crucial role in ensuring fair pricing on credit and increasing transparency and liquidity in unsecured debt.”
He added in the press briefing that there is bipartisan support in both the House and Senate for choice in moving away from Libor.
“Libor suffered from lack of depth but more from lack of breadth, which led to manipulation. Ameribor has remarkable breadth, and its depth is growing, too.”
There is a difference between the role of regional banks and that of the large Wall Street banks, Giancarlo said. “So we need a different type of benchmark diversity.”
AFX members have been talking to their representatives in Congress to make sure they understand the importance of choice in replacement benchmarks, Giancarlo added.
You can watch the entire AFX press briefing, “Ask a Banker: Countdown to LIBOR’s End” with Novick, Giancarlo and Broughton, moderated by Dr. Richard Sandor, here.
Correction: An earlier version of this article mistakenly quoted Chris Giancarlo as having said Ameribor was recommended by the Alternative Reference Rates Committee and is preferred by large primary dealers of U.S. Treasury securities. In fact Mr. Giancarlo correctly said that it was SOFR that was recommended by the ARRC and is preferred by large U.S. Treasury securities dealers. JLN apologizes for the error.