Key takeaways from the ARRC's fourth roundtable

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The Alternative Reference Rates Committee (ARRC), which is charged with managing the planned transition away from USD LIBOR, held its fourth roundtable on reference rate reform on June 3. The presentations and panel discussions largely reinforced previous guidance and highlighted recent developments, but conveyed a clearer, more immediate sense of urgency around regulatory expectations and the need for market participants to take action. As it has been for the last year, the ARRC’s core message was that a successful transition from LIBOR requires market participants to embrace and adopt the Secured Overnight Financing Rate (SOFR), the ARRC’s recommended alternative rate. While there are challenges with using SOFR for institutions used to the economic characteristics of LIBOR, our perspective continues to be that early preparation is critical to managing the transition effectively and avoiding rushed efforts to catch up in the future.

Although LIBOR has yet to meet its maker, there were plenty more metaphors to go around at the ARRC’s roundtable. Here are our five key takeaways. 

  1. Sticks and carrots: Clearer consequences from the Fed
  2. The easiest way out of a hole is to stop digging: The call to reduce LIBOR exposures
  3. Seatbelts are great - but it’s better to avoid crashing in the first place: Fallbacks shouldn’t be your only plan
  4. Buyer beware: Alternatives to the alternatives
  5. Get off the sidelines and into the game: Mobilize a transition program, engage in industry efforts, and explore using SOFR now

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Julien Courbe

Financial Services Leader, PwC US

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