Back in 2017, the Financial Conduct Authority (FCA) announced that in 2021 it would phase out the London Interbank Offered Rate (LIBOR). The Federal Reserve Board (FRB) convened the Alternative Reference Rates Committee (ARRC) in 2014 to work on developing “alternative reference rates” and, as a result of FCA’s announcement, is working on various aspects of the transition from the LIBOR to other rates. On June 22, 2017 the ARRC announced that its preferred alternative reference rate is the Secured Overnight Financing Rate (SOFR). The FRB and ARRC are currently working on transitioning the SOFR into various aspects of cash and derivative products.
In a webinar from December 6, 2018 the FFIEC has announced that none of their member agencies have issued rules and regulations regarding the transition from LIBOR, nor are they currently examining financial institutions to assess LIBOR exposures or transition plans. The FFIEC is, however, currently monitoring the ARRC’s work and “are working to raise awareness and educate financial institutions and examiners” of these implemental changes.
Educational tools about the ARRC and the progress being made in implementing the SOFR (and other alternative reference rates) can be found on the ARRC’s website (https://www.newyorkfed.org/arrc); an “FAQ” about the ARRC can be downloaded directly here: https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2018/ARRC-Sept-20-2018-FAQ.pdf
In addition to this, on December 7, 2018 the Federal Home Loan Bank of San Francisco announced that they would no longer calculate and publish the 11 District Monthly Weighted Average Cost of Funds Index (COFI) after the publication of the December 2019 COFI on January 31, 2020 (see http://www.fhlbsf.com/about/news/releases/12-7-18-Cost-of-Funds-Indices.aspx).
Docutech has received questions regarding what to do in preparation for the ending of the LIBOR and COFI indices. Docutech already supports loans for the Treasury index. Clients who need to change to the Treasury index should contact Client Support and work with them to adjust mappings to trigger the appropriate documents. Client Support can be reached at 1.800.497.3584.
We will continue to monitor these developments, make any necessary adjustments, and post announcements about these changes on our website.