20 Sep SEC – Issued Chairman Gensler remarks at Fed (NY) SOFR symposium on Bloomberg Short-Term Bank Yield Index (BSBY) shortfalls.
September 20, 2021 – Symposium hosted by Fed (NY) Alternative reference rates committee, composed of systemically important financial firms, market participants to address LIBOR transition.Remarks focus on use of LIBOR-esque rates post-transition.
Bloomberg Short-Term Bank Yield Index (BSBY): Gensler remarks highlighted concern that LIBOR will be replaced by like references. Specifically cites BSBY as heightened focus, for its growing popularity to usurp LIBOR. Factors that mimic LIBOR, making BSBY a liability for markets, include its thin market. Unsecured term-lending that may also be easily manipulated, as LIBOR had been. BSBY, like LIBOR, suffers an inverted pyramid schema where its thin market buttresses hundreds of trillions in financial transactions – does not represent a credible market. Short-term BSBY dominated by highly liquid commercial paper, certificates of deposit. Gensler advocates for the committee’s suggested use of SOFR as LIBOR replacement.
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