On 29 July 2021, the Alternative Reference Rates Committee formally recommended the forward-looking SOFR term rates published by CME Group. As reported in our earlier blog post, Almost Time for Term SOFR, the rate is recommended for use in business loans, as well as the related hedges and securitizations (notably for CLOs).
ARRC Chairman, Tom Wipf, stated that the formal recommendation concludes the ARRC’s Paced Transition Plan. Randal Quarles, Fed Vice Chairman for Supervision and Financial Stability Board Chair, added, “All firms should be moving quickly to meet our supervisory guidance advising them to end new use of LIBOR this year.”
Supporting its SOFR term rate recommendation, the ARRC previously published on 21 July 2021 Forward Looking Term SOFR and SOFR Averages (Applied in Advance) Conventions for Syndicated and Bilateral Business Loans and ARRC Best Practice Recommendations Related to Scope of Use of the Term Rate, and on 29 July 2021 published a factsheet—ARRC Formally Recommends a Forward-Looking SOFR Term Rate—that outlines key transition steps and upcoming milestones and summarizes SOFR’s strengths.
December 2021 is in sight.