Post-Libor Transition, There Remain Refinements to Be Made and Risks to Be Aware of

In a report last November, the Alternative Reference Rates Committee declared success as it closed the book on supplanting the Libor benchmark in the U.S. with the Secured Overnight Financing Rate (SOFR). But it did not say that all work is complete.

ARRC’s website remained open though deactivated, as the committee said that its closing report highlighted “key areas that the ARRC believes firms should focus on going forward to preserve the robust system of reference rates achieved through the decade-long transition effort.”

“We must uphold the lessons from the transition to avoid ever needing to repeat it again,” said Federal Reserve Bank of New York president and CEO John C. Williams.

“I urge all market participants to take the closing report’s messages to heart to ensure robust reference rates endure,” said ARRC Chair Peter Phelan, managing director in the Office of the Chief Operating Officer at Citi.

Issues Identified

The ARRC described three areas of focus for firms to “preserve the much more robust system of reference rates that has been achieved”:

• Maintain an appropriate balance between use of daily SOFR and term SOFR,...