ARRC Chairman: Urgent Action Needed on Libor Transition

In a Bloomberg op-ed today, Tom Wipf, chairman of the Alternative Reference Rates Committee, emphasized the need for public and private sector participants to work together in preparation for the cessation of the London Interbank Offered Rate. The op-ed comes after confirmation from the administrator of Libor that the widely used benchmark will cease publication, with certain Libor tenors ceasing by the end of this year.

Wipf—who is also vice chairman of institutional securities at Morgan Stanley—highlighted that legacy contracts that mature after mid-2023 remain “one of the transition’s thorniest issues,” as they do not have effective fallback language to facilitate a move to a different reference rate such as the Secured Overnight Financing Rate, the ARRC’s preferred Libor alternative. “This subset of contracts must be dealt with to avoid a financial and legal mess that could clog court systems for years,” Wipf said, adding that legislation will likely be needed to address the fate of these contracts once Libor ends.

“The ARRC has put forward legislation in New York State, the jurisdiction with a sizable portion of these tough legacy contracts,” he said. “We also support similar legislation at the federal level to safely and legally designate an appropriate fallback approach.”