Refinitiv announces that it intends to launch forward-looking forward rate versions of its ARRC Recommended Fallback Rates – USD IBOR Cash Fallbacks – in September 2022. This follows the ARRC’s announcement ( Alternative Reference Rates Committee) of March 2021 that it had chosen Refinitiv to publish its recommended rates. fallback rates for spot products and Refinitiv’s announcement in November 2021 that it had published production fallback rates based on various SOFR conventions.
LIBOR is one of the most widely used benchmarks in the world. On March 5, 2021, the Financial Conduct Authority (FCA) announced that immediately after June 30, 2023, the 1 month, 3 month, 6 month and 12 month US dollar LIBOR parameters will cease or no longer be representative. .
There are trillions of dollars of treasury products such as loans, bonds and securitized products that reference LIBOR and mature after June 30, 2023, which will use ARRC recommended fallback rates through the use of appropriate fallback language or New York and federal laws.
USD IBOR Cash Fallbacks will help these legacy USD LIBOR contracts transition smoothly from USD LIBOR and provide market participants, including lenders and borrowers, with an industry standard agreed rate, which can be clearly and easily referenced in contracts.
Refinitiv announces that it intends to launch forward-looking versions of the USD IBOR Cash Fallback Term Rates in September 2022. These rates will be based on the CME Term SOFR plus ARRC recommended spread adjustments. There are two versions of the Refinitiv USD IBOR Cash Fallbacks: one for institutional cash products, the other for consumer cash products. The forward rate versions of the two USD IBOR Cash Fallbacks will be available as all-inclusive spread-adjusted rates in terms of 1 month, 3 months, 6 months and 12 months.
Prospective versions of IBOR Institutional Cash Fallbacks USD forward rates will be released as production benchmarks and IBOR Consumer Cash Fallbacks in USD will initially be released as prototype rates with the intent that these rates go into production immediately thereafter. on June 30, 2023, when the ARRC recommended spread adjustments for consumer products will be officially set.
Repairers who wish to communicate their intention to switch to the fallback solutions recommended by the ARRC after June 30, 2023 can refer to the Refinitiv USD IBOR Consumer Cash Fallback 1 month, Refinitiv USD IBOR Consumer Cash Fallback 3 months, Refinitiv USD IBOR Consumer Cash Fallback 6 monthsand Refinitiv USD IBOR Consumer Cash Fallback 12 months respectively.
Consumers can be directed to https://www.refinitiv.com/usdiborconsumercashfallbacks to see ARRC recommended fallback rates and the most recent rate history. The fallback funds recommended by the ARRC on the IBOR in USD for consumers are not floors. Refinitiv also releases a version of its fallbacks where the overall rate is floored at zero – USD IBOR Consumer Cash Fallbacks Floored – which may be appropriate when the contractual fallbacks reference a floor rate.
As of November 2021, Refinitiv USD IBOR Institutional Cash Drawbacks based on Futures Compounded SOFR, Single Daily Futures Compounded SOFR and Advance Compounded SOFR plus spread adjustment are available for use in forward contracts. financial and non-financial business. Refinitiv also produces USD IBOR Consumer Cash Fallbacks based on pre-compounded SOFR plus a spread adjustment. With the exception of the 1-week and 2-month IBOR USD Consumer Cash Fallbacks, these consumer rates are prototypes.
Jacob Rank-Broadley, Head of LIBOR Transition, Benchmarks and Indices at Refinitiv said, “The addition of forward rate versions of the Refinitiv USD IBOR Cash fallback solutions complements the existing suite of fallback rates for spot products. Market participants can now confidently begin transitioning from legacy USD LIBOR contracts to ARRC recommended fallback rates without delay. These tariffs offer the industry an efficient solution that reduces the operational burden on market participants and protects old contracts once LIBOR is no longer available.
Tom Wipf, ARRC Chairman and Vice President of Institutional Securities at Morgan Stanley said: “The ARRC has worked closely with consumer advocacy groups and with lenders and other key stakeholders to develop its recommended fallback rates for consumer loans, and believes that publication by Refinitivization of these ARRC recommended fallback rates will provide an essential tool for a smooth transition. . Refinitiv’s rates can also be a useful tool for other currency products, and we’re excited to see them move to publication.
Businesses and individuals can receive Refinitiv USD IBOR Cash Fallbacks through Refinitiv’s full suite of products, including Refinitiv Workspace, Refinitiv Eikon, Refinitiv Real-Time and Refinitiv DataScope as well as through Refinitiv’s website. From September, forward-looking versions of forward rates will also be available through these channels.
For more information on Refinitiv USD IBOR cash fallback solutions, please visit here.