LIBOR Discontinuance Update - What You Should Know

As you likely know by now, in July 2017 the U.K.'s Financial Conduct Authority announced that LIBOR will be phased out by 2021. However, as we previously advised in our September 2017 Alert, lenders need not rush into replacing LIBOR for a new substitute index, as there is an ongoing process to facilitate an orderly transition in the market to a new, replacement index rate in place of LIBOR.

On April 13, 2018, the Federal Reserve Bank of New York (the "New York Fed") began publishing three new reference rates based on overnight repurchase agreement transactions collateralized by Treasury securities. These new reference rates are the Broad General Collateral Rate (BGCR), the Tri-Party General Collateral Rate (TGCR) and the Secured Overnight Financing Rate (SOFR). The Alternative Reference Rates Committee formed by the Federal Reserve to address LIBOR replacement has identified SOFR as a potential candidate for the LIBOR replacement. The New York Fed describes SOFR as