Guide to support transition of cash products away from LIBOR published

Supporting the transition of legacy cash products using a defunct reference rate is the aim of a new guide released Monday by the group that developed and implemented an alternative to the obsolete rate.

According to the Alternative Reference Rates Committee (ARRC), the LIBOR Legacy Playbook describes the existing broad frameworks to support the transition of legacy LIBOR cash products. “While not intended to provide legal advice, the guide aims to provide tools and resources, including a compilation of best practice recommendations and reference materials, to assist market participants in ensuring that the transition from LIBOR is operationally successful,” the group said.

According to ARRC, the guide outlines steps market participants may use navigate the successful implementation of the range of fallbacks for various cash products in preparation for the complete demise of LIBOR by June 30, 2023, when publication of U.S. dollar LIBOR ends entirely, chiefly for legacy contracts.

The steps include:

  • conducting a thorough assessment of the fallbacks that are embedded (either contractually or through legislation) in every USD LIBOR contract;
  • remediating those contracts where feasible to reference SOFR before June 30, 2023, in order to minimize the operational challenges that will arise in transitioning the large number of contracts that currently reference USD LIBOR;
  • adopting plans to communicate each contract’s fallback with the affected parties for those USD LIBOR contracts that remain; and
  • making sure sufficient resources are allocated to ensure that these rate changes are successfully put into effect.

The release of the guide is timed with an announcement, also set for Monday, by the Federal Reserve Bank of New York (which, with the Federal Reserve Board, established the ARRC), focusing on the financial industry’s transition away from LIBOR, which ARRC said would bring together “public and private sector leaders who have played critical roles in the transition.”

ARRC Releases Guide to Support Transition of Legacy LIBOR Cash Products