New York Fed’s Held: ‘Libor Countdown Has Not Stopped’

Despite the pandemic, financial institutions should not expect a delay in the Dec. 31, 2021, date when publication of the London Interbank Offered Rate can no longer be relied upon, Federal Reserve Bank of New York General Counsel Michael Held said at an investor conference today. “Some people have asked whether the end of Libor will be pushed out somehow to allow more time for transition,” Held said. However, “despite everything else that’s happening, the end of Libor is still coming. Exactly how that happens is still uncertain, but the best response to uncertainty about tomorrow is to take decisive action today.”

He added that market participants should not wait for a forward-looking term version or a credit-sensitive element in the Alternative Reference Rates Committee’s preferred alternative, the Secured Overnight Financing Rate. While the ARRC has consulted on the design of term SOFR, “that doesn’t mean you should wait for it,” Held said. “No one can guarantee that the ARRC will end up recommending a term rate, or when that will happen if it does.”

As for the credit-sensitive element of a reference rate present in Libor but missing in SOFR, Held said the New York Fed is hosting workshops to understand bank and borrower points of view but declined to comment further. While defending SOFR as “the clear first choice” of the ARRC, he said that “no one is requiring that everyone use SOFR for all purposes or for any specific purpose. There are other alternatives out there, and nothing prevents you from using any rate that’s robust, appropriate for your institution, and fit for the use you’re putting it to.”