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ARRC Updates Recommended Best Practices for LIBOR Transition
Practical Law Legal Update w-027-2022 (Approx. 3 pages)
ARRC Updates Recommended Best Practices for LIBOR Transition
by Practical Law Finance
| Published on 27 Aug 2020 • USA (National/Federal) |
The Alternative Reference Rates Committee (ARRC) updated its recommended best practices for assisting market participants with preparation for the anticipated discontinuation of US dollar (USD) LIBOR to recommend broad adoption of the IBOR fallback protocol soon to be published by ISDA.
On August 19, 2020, the Alternative Reference Rates Committee (ARRC) updated its recommended best practices for assisting market participants with preparation for the anticipated discontinuation of US dollar (USD) LIBOR to recommend broad adoption of the IBOR fallback protocol soon to be published by ISDA®.The ARRC believes that broad adoption of the protocol is necessary to ensure that the derivatives market continues to function during the transition away from LIBOR.
The ISDA IBOR fallback protocol is intended to ensure that existing derivatives contracts feature durable fallbacks to account for the discontinuation of LIBOR. In a recent letter, ISDA stated that market participants will be able to sign up to adhere to the protocol "in escrow"; these market participants would be included among a list of early adherents announced at the time of the official launch of the protocol (see Legal Update, ISDA proposes adherence in escrow process for IBOR Fallback Protocol).
The ARRC LIBOR best practices updates:
- Encourage dealers and other firms with significant derivatives exposures to adhere to the protocol during the escrow period in order to promote adoption on as timely a basis as possible.
- Recommend that other market participants "adhere to the Protocol for IBORs within the 3-4 month period after it is published and before the amendments to embed the fallbacks in the legacy transactions take effect."
ARRC originally published recommended best practices in May 2020 (see Legal Update, ARRC Publishes Recommended Best Practices for LIBOR Transition).
For more information on LIBOR and interest rate benchmark reform, see LIBOR Replacement Toolkit.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this Update.