EBL concludes first SOFR-based deal with Wells Fargo

Eastern Bank Limited has taken SOFR-based trade loan recently from Wells Fargo Bank.

This is the first SOFR-based transaction in Bangladesh market for the lender.

Under the deal, Wells Fargo, Singapore has extended a trade loan facility for 180 days to EBL where SOFR has been taken as the US Dollar benchmark rate instead of LIBOR, said a media release on Saturday.

As the publication of most tenors of the London Interbank Offered Rate (LIBOR) is expected to cease by the end of 2021, financial market participants across the globe are now gradually moving to risk-free interest rates.

The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by treasury securities.

SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data, GCF Repo transaction data, and data on bilateral Treasury repo transactions. SOFR is calculated differently from LIBOR and does not have a credit risk component.

Deputy Managing Director and Head of Treasury, FI and Offshore banking of EBL Mehdi Zaman said, “The transition from LIBOR to risk-free benchmark rates is a recent development in the financial market across the globe and we are happy to partner with Wells Fargo in our first step into the new era of Alternative Reference Rates. This deal will help us prepare for this crucial LIBOR transition and future business endeavours.”

Managing Director and Head CIB –FIG, APAC South, Wells Fargo Bank Santanu Sengupta said, “As the global financial markets transition from LIBOR to Alternative Reference Rates, we are delighted to partner with Eastern Bank on their first SOFR benchmarked loan. Wells Fargo has played a leading role in this important industry initiative and we continue to work with our partners to prepare for the LIBOR transition.”

Wells Fargo & Company is a leading financial services company that has approximately $1.9 trillion in assets, serves one in three households and more than 10 per cent small businesses in the US. It ranked No 37 on Fortune’s 2021 rankings of America’s largest corporations.