But a bank will not find LIBOR available after year-end, even if it doesn’t want to use SOFR for loans and hasn’t chosen a different alternative reference rate. Reviewing banks’ cessation of LIBOR use after year-end will be one of the highest priorities of the Fed’s bank supervisors in the coming months.
If market participants do use a rate other than SOFR, they should ensure that they understand how their chosen reference rate is constructed, that they are aware of any fragilities associated with that rate, and—most importantly—that they use strong fallback provisions.