Muscat:BankDhofar executed its first Secured Overnight Financing Rate (SOFR) linked transaction.
The transaction was a trade finance facility availed from Wells Fargo Bank N.A. The facility will further help the bank provide trade finance facilities to its corporate customers. BankDhofar is one of the first banks in Oman and the region to execute a SOFR linked transaction.
SOFR is a benchmark interest rate for dollar-denominated derivatives and loans. Unlike the London interbank offered rate (LIBOR), SOFR is calculated based on past transactions and is considered a close proxy for a risk-free rate. SOFR is an identified replacement for USD LIBOR (London Inter-Bank Offered Rate) which will be phased out at the end of 2021 for some tenors and end June 2023 for other tenors.
Commenting on the transaction, Abdul Hakeem Al Ojaili, Chief Executive Officer said, “This transaction is a testimony to our strong relationship with global banks. The transaction was priced off SOFR averages and represents a significant breakthrough for the bank as the industry transitions away from the Interbank Offered Rate (IBOR). The transaction also demonstrates BankDhofar’s position as a leader in adapting and aligning its systems and processes to embrace Alternate Reference Rates (ARRs).”
BankDhofar has been preparing for the LIBOR transition and the new risk-free rates for some time, and this landmark transaction is an important step towards developing relevant products for its corporate customers in Oman.
Aligning its strategic growth vision with the context of the national priorities and the economic aspirations of the Sultanate, BankDhofar has embarked on a comprehensive organisational transformation journey, implementing major programmes to lay out a solid infrastructure that would get the bank ready for its next phase of business expansion and development.
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