CHICAGO – September 10, 2024 – The American Financial Exchange (AFX), a self-regulated exchange that provides banks and financial institutions a marketplace for overnight unsecured interbank lending and borrowing, announced today that it has published new research in coordination with the University of Massachusetts Amherst’s Marco Macchiavelli, Assistant Professor of Finance with the Isenberg School of Management and former Principal Economist at the Federal Reserve. The whitepaper examines reference rate options following the cessation of LIBOR in July 2023.
As the provider of AMERIBOR, AFX offers a credit-sensitive benchmark interest rate that is a true reflection of the lending and borrowing costs for America’s regional and community banks. The new whitepaper demonstrates the benefits of credit-sensitive rates (CSRs), with key takeaways including:
- CSRs are beneficial for smaller financial firms during times of market stress.
- During the COVID-19 pandemic, commercial banks indexing their credit lines to SOFR may have received lower returns while facing higher borrowing costs.
- SOFR does not capture the marginal funding costs of commercial and regional banks.
AFX CEO, John Shay, commented: “The research conducted by Professor Macchiavelli underscores the need for a credit-sensitive rate. Community and regional banks are the backbone of America’s financial system. At AFX, we are proud to continue offering the AMERIBOR rate to best serve our 250 member banks across the country.”
The paper’s author, Professor Macchiavelli, added: “My research has indicated that access to CSRs are important for smaller financial institutions, especially during times of market stress. Since the cessation of LIBOR last year, rates like AMERIBOR have filled the void and supplied these institutions with a beneficial benchmark rate that fulfills the requirements of their borrowing and lending needs.”
To read the full whitepaper, please visit:
About American Financial Exchange
The American Financial Exchange (AFX) is a self-regulated electronic exchange providing over 250 banks and financial institutions a marketplace for overnight unsecured interbank lending and borrowing. The transactions on AFX power AMERIBOR®, a credit-sensitive benchmark interest rate that is the true reflection of the lending and borrowing costs for Main Street banks that represent approximately 25% of the U.S. banking sector’s total assets. For more information visit www.theafex.com.
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