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ARTICLE · 18 MAY 2020

ARRC Recommends A Five-Year Median Spread-Adjustment Methodology For Cash Products Referencing Usd Libor

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On April 8, 2020, the Alternative Reference Rates Committee (ARRC) released a preliminary recommendation for calculating spread adjustments to cash products referencing USD LIBOR.

United StatesFinance and Banking
Donna Parisi
Donna Parisi
Geoffrey Goldman
Geoffrey Goldman
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On April 8, 2020, the Alternative Reference Rates Committee (ARRC) released a preliminary recommendation for calculating spread adjustments to cash products referencing USD LIBOR.1 The calculation methodology should provide greater clarity to market participants who are planning to implement the ARRC's proposed fallback language as the industry transitions away from LIBOR.

Background

Spread adjustments minimize changes in value that result from replacing reference rates. In January 2020, the ARRC published a consultation2 on various spread-adjustment methodologies and requested that market participants express their views on which would be best suited to particular cash products. The consultation focused on floating rate notes, securitizations, business loans and consumer products.

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