Following up on our past posts on the transition away from the London Interbank Offering Rate (“LIBOR”), and other interbank offering rates (“IBOR”) denominated in other currencies, in this post, we discuss the ARRC key objectives for 2020 released by the Alternative Reference Rates Committee (“ARRC”), the group of private market participants advising the Federal Reserve on the LIBOR transition.
ARRC’s objectives build on their previous work in helping the market’s readiness for moving away from LIBOR and in the adoption of the Secured Overnight Financing Rate (“SOFR”). Among these objectives, the ARRC plans to publish revisions to the ARRC’s fallback language for business loans (including a more permissive early opt-in trigger), as well as fallback language for new student loans referencing LIBOR, by June 30, 2020.
By September 30, 2020, the ARRC also plans to develop resource guides for consumer education and determine a process for selection of an administrator to publish the ARRC’s spread adjustments and rates. In addition, the ARRC has many ongoing goals, such as continuing to pursue legislative relief for the LIBOR transition. “2020 will be a pivotal year in the transition away from LIBOR,” said ARRC Chair Tom Wipf.
An ARRC 2020 press release also announced that the ARRC soon would be releasing a set of “recommended best practices.” Both the upcoming best practices and 2020 key objectives have been prepared with the impacts of COVID-19 in mind.
In addition, the UK Financial Conduct Authority issued a statement reaffirming that firms cannot rely on LIBOR being published after the end of 2021, and that the timeline for discontinuing LIBOR remains the same.
“The LIBOR Transition” is a periodic series of updates discussing reference interbank offering rates, such as LIBOR, and the challenges involved in navigating a successful transition from their use as reference rates of choice in the market. Norton Rose Fulbright has assembled a group of its lawyers from around the globe to stay on top of these issues and assist clients in the transition to new reference rates. More information can be found on our Norton Rose Fulbright web site.