How the LIBOR Transition Affects the Supply of Revolving Credit
![Photo of two sticky notes: one with LIbor crossed out, the other with SOFR checked. Concept of London Interbank Offered Rate being discontinued and succeeded by SOFR - Secured Overnight Financing Rate - as the base rate for loan and swap financial products.](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2023/02/LSE_2023_libor_luck_460b.jpg?w=920)
In the United States, most commercial and industrial (C&I) lending takes the form of revolving lines of credit, known as revolvers or credit lines. For decades, like other U.S. C&I loans, credit lines were typically indexed to the London Interbank Offered Rate (LIBOR). However, since 2022, the U.S. and other developed-market economies have transitioned from credit-sensitive reference rates such as LIBOR to new risk-free rates, including the Secured Overnight Financing Rate (SOFR). This post, based on a recent New York Fed Staff Report, explores how the provision of revolving credit is likely to change as a result of the transition to a new reference rate.