FRB Governor Describes Transition From LIBOR To Alternative Rate

Board of Governors of the Federal Reserve System ("FRB") Governor Jerome H. Powell described some of the considerations around a transition from the London Interbank Offered Rate ("LIBOR") to an alternative rate.

In remarks at the Roundtable of the Alternative Reference Rates Committee ("ARRC") held at the Federal Reserve Bank of New York, Governor Powell described how LIBOR came under scrutiny during the financial crisis due to reports of manipulation by bank employees. Mr. Powell said the FRB concluded that the largest problem faced by LIBOR was the dearth of underlying transactions serving as the basis for the rate. This left LIBOR susceptible to manipulation, he said. In addition, Governor Powell asserted that a transactions-based rate determined by activity in wholesale unsecured funding markets was not feasible.