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Written Statement By Federal Reserve Chairman Jerome Powell Regarding The Suitability Of AMERIBOR As A Replacement To LIBOR

Date 02/06/2020

Federal Reserve Board Chairman Jerome H. Powell has provided a statement regarding the suitability of AMERIBOR as a replacement to LIBOR. The written statement dated May 28, 2020 was in response to a “question for the record” from Sen. Tom Cotton (R-AR) following Chairman Powell’s testimony to the US Senate’s Committee on Banking, Housing and Urban Affairs held on February 12, 2020.

Senator Cotton asked if the Fed supports alternative benchmark interest rates besides the Secured Overnight Financing Rate – such as AMERIBOR - for the replacement of Libor.

Chairman Powell wrote that “the Federal Reserve convened and supports the work of the Alternative Reference Rates Committee (ARRC) and views SOFR as a robust alternative that will help many market participants in the transition away from LIBOR. However, we have been clear that the ARRC’s recommendations and the use of SOFR are voluntary and that market participants should seek to transition away from LIBOR in the manner that is most appropriate given their specific circumstances.”

Chairman Powell went on to state for the record: “Ameribor is a reference rate created by the American Financial Exchange based on a cohesive and well-defined market that meets the International Organization of Securities Commission’s (IOSCO) principles for financial benchmarks. While [Ameribor] is a fully appropriate rate for the banks that fund themselves through the American Financial Exchange (AFX) or for other similar  institutions for  whom Ameribor may reflect their cost of funding, it may not be a natural fit for many market participants.”

The AFX facilitates the determination of AMERIBOR, a transaction-based interest rate benchmark for banks via its electronic trading platform. Since the start of the AFX and the AMERIBOR benchmark, more than $970 billion in value has been transacted and continues to rise.

“Chairman Powell’s response to Sen. Cotton’s question reinforces the importance of choice in the use of  benchmarks  and is key to the development of SOFR and AMERIBOR. Both are complementary to each other and offer robust alternatives as the market transition away from LIBOR. Chairman Powell’s response and other recent statements from Fed officials and the Alternative Reference Rate Committee provide greater impetus to AMERIBOR as it becomes a viable replacement for LIBOR,” said Dr. Richard L. Sandor, Chairman and CEO of the American Financial Exchange.

For more information about AFX or AMERIBOR, visit www.ameribor.net.