17 July 2026 · Risk Free Rates Team
How to Verify the Interest Your Bank Charges on SOFR and SONIA Loans
A practical guide for corporate treasurers: rebuild your bank's compounded-in-arrears interest calculation from official central bank data and reconcile it line by line — in minutes, for free.
The problem: one number, twenty inputs
Before 2022, checking a LIBOR loan invoice took one minute: one published rate, times principal, times days. Since the transition to risk-free rates, a single month's interest on a SOFR or SONIA facility is built from twenty or more daily fixings, each carrying its own day-weight, shifted back by a lookback period, and compounded — or not — depending on your facility agreement.
Your bank's interest advice arrives as one number. Most treasury teams book it unchecked, because rebuilding the calculation in a spreadsheet means sourcing daily fixings, handling weekends and public holidays, and getting the lookback convention exactly right.
That's precisely what this site automates.
What can actually go wrong
Banks run robust systems, but reconciliation breaks are real — and they cluster in five places:
| Failure point | What it looks like |
|---|---|
| Day-count basis | Act/360 (SOFR, €STR) vs Act/365 Fixed (SONIA, TONA) — a mix-up moves the charge ~1.4% |
| Lookback convention | "Without observation shift" (ARRC loan standard) vs "with observation shift" (FRN standard) produce different totals |
| Holiday weighting | A Friday fixing carries 3 calendar days; the day before Juneteenth carried 4 in June 2026 |
| Stale or provisional fixings | Interest computed before a fixing was finalised, never trued up |
| Rounding | Rounding the rate at a different step, or to different decimals, than the facility agreement specifies |
None of these are visible in a one-line invoice. All of them are visible in a daily ledger.
A worked example you can reproduce
Take a real facility: USD 1,000,000, interest period 1–30 June 2026, spread 2.50%, compounded SOFR in arrears with a 5-business-day lookback (no observation shift) — the ARRC syndicated loan standard.
Using the New York Fed's official daily SOFR fixings for the observation window (which correctly skip Memorial Day, and give 18 June a 4-day weight because of the Juneteenth holiday), daily compounding produces:
| Result | Value |
|---|---|
| SOFR component (annualised) | 3.62595% |
| Effective rate incl. spread | 6.12595% |
| Total interest | USD 4,934.79 |
The same facility on simple (non-compounded) interest gives USD 4,930.83 — the USD 3.96 gap is the compounding premium. If your bank's advice shows anything materially different from your own run, the daily ledger will show you exactly which day, rate, or weight diverges.
How to run the check (three minutes)
- Open the calculator and select your benchmark — SOFR, SONIA, €STR or TONAR — and methodology (compounded in arrears or simple).
- Enter the facility terms from your rate-fixing advice: principal, period start and end, spread, lookback days, and whether observation shift applies (your agreement's "Interest" clause specifies this).
- Calculate, then export. You get every daily fixing pulled live from the NY Fed, Bank of England, ECB or Bank of Japan, each day's weight and accrual, the effective rate, and the total — downloadable as Excel or PDF for your reconciliation file.
Compare the total first. If it differs, compare the ledger against the bank's fixing schedule line by line — the first row that diverges names the problem (wrong fixing, wrong weight, or wrong convention).
Why you can rely on the rebuild
The compounding engine here reproduces the New York Fed's own published 30-day compounded SOFR average to all five published decimal places from raw daily fixings — the strongest external check available. Conventions follow the ARRC (USD), the Bank of England's SONIA methodology, the ECB (€STR), and Japan's cross-industry committee (TONA), and every fixing comes from the central bank source itself.
What to do with a discrepancy
Small differences (cents to a few dollars per million) are usually rounding-step differences — worth a query, rarely a dispute. Larger breaks typically trace to the lookback convention or day-count basis, and the ledger gives you the specific dates to cite. Either way, you'll be querying your bank with a daily breakdown in hand rather than a hunch.
Your next interest invoice doesn't have to be taken on trust. Run the verification →
This guide is for informational purposes only and is not financial, legal, or accounting advice. Confirm conventions against your facility agreement.