On Wednesday. March 25, SFA submitted a response to the Alternative Reference Rates Committee (ARRC) regarding their consultation on spread adjustment methodologies for fallbacks in cash products referencing Libor.
The Bank of England and the Financial Conduct Authority (FCA) have alerted the industry that the timeline for slated milestones supporting a smooth transitioning away from LIBOR could be impacted by the financial fallout from the coronavirus pandemic.
As the economic concerns surrounding COVID-19 cause a "cash crunch" for U.S. dollars and cause spikes in interest rate benchmarks, the finance industry has begun to question whether Libor and its upcoming successor, SOFR, are appropriate measures for lending markets.
On Monday, March 2, the New York Fed and the Office of Financial Research began publishing the ARRC recommended 30-, 90-, and 180-day SOFR averages and a SOFR Index in order to support a successful transition away from Libor.
On Wednesday, February 19, Structured Finance Association President Kristi Leo joined a market participant panel for Congressional financial services staff that focused on the challenges associated with Libor transition.
At a recent Senate Banking Committee Hearing, Federal Reserve Chairman Jerome Powell told Senators that the Federal Reserve would be open to the idea of exploring a separate alternative reference rate that would be credit sensitive as the financial services industry prepares to transition away from Libor in 2021.