On May 27, 2020, the Alternative Reference Rate Committee (ARRC) published a set of recommended steps and target dates to guide market participants in accelerating their transition efforts in advance of LIBOR’s likely cessation at the end of 2021. The document references the committee’s previously issued recommendations on fallback language for cash products, target dates for vendor readiness and practical tools such as FAQs, checklists and guides for using the Secured Overnight Financing Rate (SOFR), the recommended alternative for USD LIBOR.
For cash products the recommendations include explicit target dates for the inclusion of ARRC-recommended hardwired fallback language in new products, vendor readiness to support the processing of new products tied to SOFR, the end of issuances of new cash products tied to USD LIBOR and disclosure of the intended replacement rate to counterparties in cases where replacement rate discretion exists. For derivatives the recommendations include target dates for market participants to adhere to ISDA’s upcoming IBOR Fallback Protocol, steps and associated target dates for dealers to promote liquidity and access to SOFR derivatives and a target date to stop entering into new derivative trades that would increase LIBOR risk.
A publication of PwC's financial services regulatory practice
Financial Services Leader, PwC US