ARRC | 2/16/2022

Topics discussed at the meeting included the momentum towards the Secured Overnight Financing Rate (SOFR) and the ARRC’s key objectives for 2022

BRN Take: The Alternative Reference Rate Committee discusses the broad adoption of SOFR across linear, non linear and exchange traded derivatives, cross currency swaps, cash instruments and syndicated loans.

ARRC | 1/25/2022

1. The December 31, 2021 end of sterling, yen, swiss franc, and euro LIBOR achieved a major milestone in the LIBOR transition without market disruption. 2. Progress in the transition to the Secured Overnight Financing Rate (SOFR) accelerated across cash and derivatives markets ahead of the 2021 year-end milestone and into 2022. 3. The U.S. Department of the Treasury and Consumer Financial Protection Bureau (CFPB) issued final rules relating to the transition away from LIBOR.

BW Take: The ARRC monthly discusses the global strength of the Libor transition and how SOFR is dominating both the cleared swap risk and syndicated loan activity relative to Libor. As the spread between risk free and credit sensitive rates like BSBY widen, a multi rate environment may begin to gain momentum.

American Banker (REG) – Bryan Bashur | 1/19/2022

Now that 2021 is over, regulators expect financial institutions to forgo use of the London interbank offered rate as a benchmark interest rate to gauge the cost of lending for newly drafted financial contracts and start using alternative reference rates. It is imperative that the United States government implement regulatory relief, emphasize flexibility and develop concrete guidelines for financial institutions so they can easily adapt to the changing interest rate landscape. As banks and other financial institutions rewrite contracts for mortgages, credit cards, bonds, student loans and financial derivatives to adjust to fluctuating interest rates, the federal government needs to ensure that the tax burden is limited and litigation is mitigated.

BW Take: In highlighting the labyrinth of over $220 trillion in financial instruments that reference USD Libor (end of ’20), many challenges of this historic transition remain including the need for regulators to clearly support the use of credit sensitive benchmark rates like BSBY which accurately reflect the funding costs of lenders.

US Senate Committee on Banking Housing & Urban Affairs | 11/2/2021

I am Chris Giancarlo, Senior Counsel at the law firm of Willkie Farr & Gallagher. I had the honor to serve our country as the thirteenth Chairman of the U.S. Commodity Futures Trading Commission (CFTC), a Federal agency that has led and continues to lead the transition away from the LIBOR interest rate benchmark, the subject of today’s hearing. I am also an independent director of the American Financial Exchange.

BW Take: Chris Giancarlo speaking before the senate banking committee stressed that there is simply no one-size-fits-all lending benchmark for an economy as unique and diverse as the United States. “Having choice among multiple, properly qualified benchmarks not only facilitates the transition away from LIBOR, but it also enhances efficiency, reduces systemic risk and encourages economic growth as we progress through the transition process”.

US Senator Pat Toomey (Pennsylvania) | 11/2/2021

Thank you, Mr. Chairman. The London Interbank Offered Rate – or LIBOR – has long been the most widely used U.S. dollar-denominated benchmark interest rate across all types of financial contracts. LIBOR is the rate at which large banks report they can borrow from one another in the interbank market on a short-term, unsecured basis.

BW Take: Senator Pat Toomey stressed how congress’s authority to amend contracts between private parties should be enacted as a last resort and mindful of the equities of the contract. In discussing the need for choice, Sen Toomey said “Risk-free rates like SOFR may work well for derivatives contracts and institutions active in the Treasury repo market, but they may not be well-suited for loans or certain community or regional banks”.

ISDA | 11/1/2021

The Transition to Risk-free Rates (RFRs) Review analyzes the trading volumes of over-the-counter (OTC) and exchange-traded interest rate derivatives (IRD) that reference selected alternative RFRs, including the Secured Overnight Financing Rate (SOFR), the Sterling Overnight Index Average, the Swiss Average Rate Overnight, the Tokyo Overnight Average Rate, the Euro Short-Term Rate and the Australian Overnight Index Average.