Libor, the most important interest rate you’ve never heard of, is about to change

Replacing it will be anything but easy.

It also means any regular investor with a floating rate loan will experience some changes in the near-term.

Libor, or the London Interbank Offered Rate, is the daily-calculated interest rate at which banks lend to one another. It is also the benchmark rate for trillions of US dollar-denominated contracts and loans, such as floating rate mortgages.

The 2007-2009 financial crisis uncovered that Libor had been manipulated by various financial firms to prop up returns and veil financial weakness. This brought on calls for for reform, but replacing something so entrenched in the global financial system is no easy task.

The leading proposed replacement is SOFR, the Secured Overnight Financing Rate, which is published by the New York Federal Reserve and based on actual overnight transactions financial companies borrow cash using US Treasury securities — or government debt — as collateral.

One advantage of SOFR is that it is harder to manipulate, because it is based on real transactions, unlike Libor.

The Federal Reserve and global regulators have made clear that they want Libor to be a thing of the past. New York Fed President John Williams said in a speech last year only three things in life are certain “death taxes and the end of Libor.”

But many banks aren’t happy with SOFR as the chosen successor, claiming it is missing important attributes that made Libor so useful.

“The market is not particularly well prepared at this point in time,”…

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