The Federal Reserve today asked for public comment on a proposal for the Federal Reserve Bank of New York to publish three new reference rates for use in U.S. dollar derivatives and financial contracts. The proposal comes as the London Interbank Offer Rate — the standard reference rate in use today, with more than $160 trillion in outstanding loans, derivatives and financial products pegged to it — will be sustained only through the end of 2021.
The Fed is proposing to publish a Secured Overnight Financing Rate, or SOFR, a broad measure of overnight Treasury financing transactions recommended by the Alternative Reference Rate Committee earlier this year as a replacement for U.S. dollar Libor. “SOFR will be derived from the deepest, most resilient funding market in the United States,” said Fed Governor Jerome Powell. “As such, it represents a robust rate that will support U.S. financial stability.”
The Fed also sought comment on plans to publish a Tri-Party General Collateral Rate, or TGCR, based on triparty repo data from the Bank of New York Mellon and a Broad General Collateral Rate, or BGCR, based on both the TGCR and cleared triparty repo data from the Depository Trust and Clearing Corporation.
Comments are due 60 days after the proposal is published in the Federal Register. The American Bankers Association continues to engage members on reference rate transition issues with respect to commercial lending obligations. For more information, or to provide feedback on reference rate transition issues, please contact ABA’s Barry Mills.