Financial firms that have not started their work to transition from the London Interbank Offered Rate and making fallback plans for contracts—especially loans—that currently reference it need to begin right away, the Basel, Switzerland-based Financial Stability Board said in a progress report today on the reference rate transition.
Next year, the FSB expects to tackle fintech developments worldwide, including the growing role of big tech firms in finance; the development of so-called “stablecoins,” virtual currencies pegged to real assets to minimize volatility; innovation to remove friction in cross-border payments; and the transition away from the London Interbank Offered Rate to new benchmarks.
The American Bankers Association joined several industry groups in a comment letter to the financial regulatory agencies this week supporting a long-awaited change to swap margin rules that would remove the requirement for covered swap entities to collect initial margin from affiliates.
In a Bloomberg op-ed on Friday, Tom Wipf—chairman of the Federal Reserve’s Alternative Reference Rates Committee and vice chairman of international securities at Morgan Stanley—pushed back against several common misconceptions about the Secured Overnight Financing Rate, the ARRC’s preferred replacement for the London Interbank Offered Rate.
The Alternative Reference Rates Committee today issued its recommended fallback language for residential adjustable-rate mortgages that reference the London Interbank Offered Rate.
In an interview with MarketWatch published today, FDIC Chairman Jelena McWilliams expressed concern that banks are continuing to originate loans with contracts tied to the London Interbank Offered Rate, despite the fact that the rate is not guaranteed to be available after 2021.
As expected, the Federal Reserve Bank of New York today announced plans to publish daily three compounded averages of the Secured Overnight Financing Rate, with tenors of 30, 90 and 120 days, as well as a daily SOFR index to allow users to calculate average rates over custom time periods.
Recent money market conditions that have seen the Federal Reserve resume regular repo operations for the first time in years should not delay market participants’ preparations to transition away from the London Interbank Offered Rate, New York Fed President and CEO John Williams said today.
The IRS today proposed regulations intended to help market participants transition from the London Interbank Offered Rate to an alternative reference rate.