Fallbacks

Supplemental Recommendations of Hardwired Fallback Language

August 18, 2021
The ARRC released a supplemental update to its recommended contractual fallback language for USD LIBOR securitizations. The supplemental update amends the definition of a Benchmark Trigger Event within the recommended fallback language to acknowledge its occurrence as a result of the March 2021 IBA/FCA announcements.

ARRC Releases Supplemental Recommendation of Hardwired Fallback Language for Business Loans

March 25, 2021
The ARRC released supplemental versions of its recommendation of hardwired fallback language for USD LIBOR denominated syndicated and bilateral business loans. The supplemental recommendation for business loans sets out abridged versions of the 2020 fallback language for syndicated business loans and bilateral business loans incorporating the certainty on fallback timing and economics afforded by the March 5th announcements. These simplified versions of the ARRC's hardwired business loans fallback reflect the ARRC's continued efforts to support a seamless transition away from USD LIBOR and encourage the broad voluntary adoption of the ARRC's recommended alternative reference rate, SOFR.

FAQs to RFP for Vendor to Publish Forward-Looking SOFR Term Rates

October 29, 2020
On October 29, the ARRC updated its FAQs to its Request for Proposals (RFP) that was published in September 2020 seeking a potential administrator to publish forward-looking SOFR term rates. This follows the publication of the ARRC's 2020 Objectives, which aimed to establish an RFP process to select a recommended administrator of forward-looking term SOFR rates, to be published in the first half 2021 if liquidity in SOFR derivatives markets has developed sufficiently.

Submitting Responses to the RFP
Questions and responses to the RFP should be sent to the ARRC Secretariat at arrc@ny.frb.org by October 31, 2020. Please provide only one response per institution, and please attach your responses in a PDF document with "Forward-Looking Term Rates RFP Response" clearly indicated in the subject line of your email.

The ARRC will evaluate responses and will require selected firms to present their proposals. Following an ARRC selection, the ARRC will publish the name of the chosen recommended administrator. The recommended administrator must be prepared to begin publication of the forward-looking term rates by June 30, 2021.

FAQs to RFP for the Administration of Recommended Spread Adjustments and Spread-Adjusted SOFR Rates to Facilitate Contractual Fallbacks

October 9, 2020
On October 9, the ARRC released FAQs to its Request for Proposals (RFP) that was published in September 2020 seeking one or more firms to publish daily indicative spreads and, after a trigger event has occurred, static spreads and spread-adjusted fallback rates for cash products that transition away from USD LIBOR. These spread-adjusted fallback rates will be based on SOFR. They are designed for use in legacy contracts with the ARRC's recommended hardwired fallback language, and other instances where spread-adjusted replacement rates are needed.

Submitting Responses to the RFP
Questions and responses to the RFP should be sent to the ARRC Secretariat at arrc@ny.frb.org by October 16, 2020. Please provide only one response per institution, and please attach your responses in a PDF document with "Spread Adjustment RFP Response" clearly indicated in the subject line of your email.

The ARRC will evaluate responses and will require selected firms to present their proposals. Following an ARRC selection, the ARRC will publish the name(s) of the chosen administrator(s).

Bilateral Business Loans Fallback Language

August 27, 2020
The ARRC released updated recommended contractual fallback language for new originations of USD LIBOR denominated bilateral business loans. The updated bilateral business loan fallback language adjusts the “Hardwired Approach” and the “Hedged Loan Approach” of the recommended language that was initially released in May 2019. That language followed an associated consultation and webcast (comments received). The ARRC also released FAQs for Business Loans Hardwired Fallback Language, which may be updated from time to time to reflect developments.

Spread Adjustment Methodologies for Fallbacks in Cash Products

June 30, 2020
The ARRC released a final recommendation coming out of its consultation (comments received) and supplemental consultation (comments received) on spread adjustment methodologies for cash products referencing USD LIBOR. These spread adjustments are intended for use in USD LIBOR contracts that have incorporated the ARRC’s recommended hardwired fallback language, or for legacy USD LIBOR contracts where a spread-adjusted SOFR can be selected as a fallback.

Floating Rate Notes Fallback Language

April 25, 2019
The ARRC released final recommended contractual fallback language for USD LIBOR denominated floating rate notes. These provisions are for market participants’ voluntary use in new contracts that reference LIBOR and were developed with the goal of reducing the risk of serious market disruption in the event that LIBOR is no longer usable. They were developed following an associated consultation and webcast (comments received).

Syndicated Loans Fallback Language

June 30, 2020
The ARRC released updated recommended contractual fallback language for USD LIBOR denominated syndicated loans. The hardwired fallback language was updated to recommend the use of simple daily SOFR in arrears in the second step of the waterfall and include a more permissive early opt-in trigger. The ARRC initially released recommended fallback language for syndicated loans in April 2019. That language followed an associated consultation and webcast (comments received).

Adjustable Rate Mortgages Fallback Language

November 15, 2019
The ARRC released recommended contractual fallback language for new USD denominated closed-end, residential adjustable-rate mortgages (ARMs). These provisions are for market participants’ voluntary use in new residential ARMs that reference USD LIBOR, and were developed with the goal of reducing the risk of serious market disruption in the event that LIBOR is no longer available. The final recommended language follows an associated consultation on the topic (comments received).

Variable Rate Private Student Loans Fallback Language

June 30, 2020
The ARRC released its final recommended contractual fallback language for new variable rate private student loans. This language was developed for new contracts that reference USD LIBOR to minimize risk and market disruption in the event that LIBOR is no longer usable. The final recommended language follows an associated consultation on the topic (comments received).

ARRC Supplemental Consultation on Spread Adjustment Methodology

May 6, 2020
The ARRC issued a supplemental consultation seeking further views on certain technical issues related to spread adjustment methodologies for cash products referencing USD LIBOR. This consultation builds on the feedback the ARRC has received on its original consultation on potential spread adjustment methodologies issued in January 2020 and includes a summary of feedback received to date on the initial consultation.

Submitting Feedback About This Consultation
The ARRC welcomes responses to the supplemental consultation from the widest possible range of stakeholders. The release of the consultation marks the start of a public comment period during which the ARRC intends to work closely with stakeholders to solicit and incorporate their input. Following this comment period, the ARRC will release a more detailed final recommendation of the spread adjustment methodology for cash products.

Market participants may submit responses to the consultation questions by email to the ARRC Secretariat (arrc@ny.frb.org) no later than June 8, 2020. Please provide only one response per institution, and please attach your responses in a PDF document with "Supplemental Consultation Response" clearly indicated in the subject line of your email. Comments will be posted on the ARRC's website as they are received without alternation, expect when necessary for technical reasons, and with attribution, unless respondents request anonymity. If your institution is requesting anonymity, please clearly indicate this in the body of your email and please ensure that the PDF document you submit is anonymized.

Questions regarding the consultation should be sent to the ARRC Secretariat (arrc@ny.frb.org) and will not be posted for attribution.

Summary of ARRC's LIBOR Fallback Language

November 15, 2019
The ARRC released a summary of its sets of recommended fallback language issued as-of November 2019 for various cash products.

Securitizations Fallback Language

April 25, 2019
The ARRC released final recommended contractual fallback language for USD LIBOR denominated securitizations. These provisions are for market participants’ voluntary use in new contracts that reference LIBOR and were developed with the goal of reducing the risk of serious market disruption in the event that LIBOR is no longer usable. They were developed following an associated consultation and webcast (comments received).

Principles for Fallback Contract Language

July 9, 2018
The ARRC released guiding principles for the development of fallback language for new financial contracts for cash products to ensure they will continue to be effective in the event that USD LIBOR ceases to be produced. These principles mark a key milestone in meeting the ARRC’s mandate to help address risks in contract language and minimize disruptions associated with a possible end to LIBOR.