Refinitiv Unveils Prototype Libor Fallback Rates

Refinitiv has unveiled the USD Ibor Cashback series of rates, a family of rates designed to help ease the transition away from Ibors over the course of this year.

Refinitiv was chosen by the US Alternative Reference Rates Committee (ARRC) in March to publish the latter’s spread-adjusted rates for cash products linked to Libor. In March, the UK’s Financial Conduct Authority (FCA) announced that one-week and two-month US Dollar Libor rate settings will cease immediately after December 31, 2021 and the remaining tenors will either be no longer representative or immediately cease publication following June 30, 2023.

There are two versions of the new Cash Fallbacks, one for consumer cash products, the other for institutional cash products. Both will be published to five decimal places.

Refinitiv says there are a number of different versions of its Institutional Cash Fallbacks. The Adjusted SOFR component includes SOFR compound in arrears, Daily Simple SOFR and SOFR compound in advance. Each of the SOFR compound in arrears and Daily Simple SOFR rates will be available with and without a lookback, observational shift, and lockout, the firm says. Added to this is the spread adjustment and unlike the Consumer Cash Fallbacks there is no transition period. The Institutional Cash Fallbacks will be published in up to seven tenors including overnight, one-week, one, two, three, six and 12 months.

“With an estimated $5 trillion of business loans, consumer loans, bonds and securitisation exposures referencing USD Libor after June 2023 its essential that suitable fallback rates are available to ensure the continued efficient functioning of our financial system,” says Sang Lee, managing partner at Aite Group. “These rates bring together extensive work by the ARRC and an experienced benchmark administrator in order to produce robust fallback rates that the industry can rely on.”

Firms are able to immediately commence evaluation of the behavior and suitability of the prototypes as well as test technical integration. The prototypes are available free of charge on Refinitiv platforms.