ARRC Recommends Slowing Use of Libor to Ease Transition

The Alternative Reference Rates Committee today recommended that all market participants slow their use of Libor over the next six weeks to ease the year-end change to alternative reference rates. Certain tenors of U.S. dollar Libor are set to sunset on Dec. 31, 2021.

Slowing new use of Libor will support firms’ efforts to follow previously-issued supervisory guidance that urges the end of new Libor contracts by Dec. 31, the ARRC said. It added that by the end of the year, there could be resource limitations and system constraints due to the year-end deadline.

A number of firms are already taking steps to slow the new use of Libor, the ARRC noted, including setting targets for reductions in new Libor activity, limiting the range of Libor offerings and implementing internal escalation exceptions processes around new Libor contracts. The ARRC said it believes that taking a proactive approach over a period of time rather than at a defined end point is “in the interest of market participants seeking to end new use of USD Libor and to support smooth market functioning.”