Bank Prudential Regulation & Regulatory Capital
Federal Reserve Board Announces Three New Reference Rates for Overnight Repo Transactions
On December 8, 2017, the Board of Governors of the Federal Reserve System announced final plans for the production of three new reference rates regarding overnight repurchase transactions of Treasury Securities. The rates will be produced by the Federal Reserve Bank of New York, in consultation with the US Office of Financial Research. The three rates—Tri-Party General Collateral Rate, Broad General Collateral Rate and Secured Overnight Financing Rate (SOFR)—are based on transaction-level data from segments of the repurchase market, and were the subject of an August 30, 2017 Federal Reserve Board request for public comment. The three interest rates will be constructed to reflect the cost of short-term secured borrowing in highly liquid and robust markets and each rate will be calculated as a volume-weighted median of transacted rates. The FRBNY intends to begin publishing these rates in the second quarter of 2018. The Federal Reserve Board also noted that although the Alternative Reference Rates Committee selected (in June 2017) SOFR as its recommended alternative to US Dollar LIBOR, the details of the transition from US Dollar LIBOR are outside the scope of the request for comment and this announcement.
The Federal Reserve Board press release and corresponding notice is available at: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20171208a.htm.
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