Interest rates

Just three months ago, U.S. banks were still using the expiring benchmark rate for the vast majority of their new loans. But regulators said Friday the transition to alternative rates has accelerated ahead of a year-end cutoff.

Forget the goods supply-chain crisis threatening global risk assets: the real test comes next year when a service-sector boom drives labor costs higher and pressures central banks to tighten policy more decisively.

Many banks are still making loans tied to the scandal-plagued benchmark despite years of preparation for its demise. The end of 2021 could prove hectic as bankers scramble to implement changes and explain them to commercial borrowers.

Federal Reserve Vice Chair Randal Quarles has made it clear that banks failing to make the transition away from the benchmark rate could face supervisory consequences.

Starting Thursday, firms should stop issuing new loans, bonds and securitizations tied to the discredited benchmark, according to the Bank of England.

Legacy contracts using the London interbank offered rate — which is set to be phased out at the end of this year — were granted a reprieve to mid-2023. However, there is no wiggle room on when the rate will expire for new deals, said Federal Reserve Vice Chairman Randal Quarles.

Some of the world’s biggest banks are urging a U.S. judge not to immediately terminate Libor after a group of borrowers filed suit claiming the benchmark was the work of a “price-fixing cartel.”

Defaults have been milder than expected thanks to government relief and stricter underwriting. But with the crisis dragging on and policymakers unable to agree on a stimulus plan, loans to highly indebted companies remain at risk.

The Consumer Financial Protection Bureau's overhaul of its Qualified Mortgage standard is alarming free-market advocates who say it will precipitate a return to easy credit and higher defaults and could disproportionately harm minorities.

The central bank said it would keep interest rates at current levels through at least to help the U.S. economy recover from the coronavirus pandemic.

The complaint filed by New York, California and Illinois argues that the regulation, issued in response to the 2015 Madden decision, undermines state laws intended to protect consumers.

The Consumer Financial Protection Bureau seeks to address challenged posed by the sunset of the London interbank offered rate at the end of 2021.

The new regulation is intended as a workaround for banks affected by the 2015 decision that created legal uncertainty for loans sold across state lines.

The head of the U.S. central bank said its emergency credit programs were not designed to prop businesses up over the long term.

A negative Federal Reserve policy rate is still improbable, but if it were to happen it could be a net benefit, according to a note from JPMorgan Chase.

The group that worked with the Fed to devise an alternative rate to Libor rejects criticism that the index favors megabanks.

If Capitol Hill plans another round of stimulus, Democrats could have more leverage to demand steps such as suspending overdraft fees or placing a temporary cap on consumer lending rates.

Most states have some kind of pricing limit on consumer loans. But proposals for a national usury law divide even Democrats, some of whom are concerned about restricting credit.

The Federal Reserve has voted unanimously to cut the interest rate 50 basis points to 1.10% effective March 4, in the first emergency rate cut since 2008.

Regulators' oversight of the industry's switch to a new interest rate benchmark is expected to intensify as a key deadline approaches.