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Financial Services Law Insights and Observations

New York Fed discusses LIBOR transition

Federal Issues Federal Reserve Bank of New York LIBOR Bank Regulatory

Federal Issues

On September 15, Michael Held, General Counsel and Executive Vice President of the Legal Group at the Federal Reserve Bank of New York, issued remarks at the ISDA Benchmark Strategies Forum regarding issues relating to the transition from U.S. LIBOR to other rates. As previously covered by InfoBytes, the Alternative Reference Rates Committee announced its recommendation of CME Group’s forward-looking Secured Overnight Financing Rate (SOFR) term rates, following the completion of key changes in trading conventions on July 26 under the SOFR First initiative. Held noted that the U.S. Treasury Department and the Federal Reserve, among others, warned of the “considerable operational, technological, accounting, tax, and legal challenges” that may impact the LIBOR transition speed and that slow progress is also a concern for the derivates market. The second transition issue Held noted is the importance of comparing rates, stating that “alternative rates should be appropriate for the bank’s funding model and customer needs.” Lastly, Held discussed that fallbacks are essential for all alternative options, and it is important for firms that are using credit-sensitive rates to have a complete understanding of their chosen rates.