ARTICLE
10 February 2020

ARRC Provides Implementation Checklist For Transition From LIBOR To SOFR

CW
Cadwalader, Wickersham & Taft LLP

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Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
The Alternative Reference Rates Committee (the "ARRC"), a group convened by the Federal Reserve Board and Federal Reserve Bank of New York, provided a "detailed practical implementation checklist".
United States Finance and Banking

The Alternative Reference Rates Committee (the "ARRC"), a group convened by the Federal Reserve Board and Federal Reserve Bank of New York, provided a "detailed practical implementation checklist" to be used by buy-side firms transitioning from LIBOR to a Secured Financial Overnight Financing Rate ("SOFR"). Specifically, the ARRC recommends:

  • establishing a robust governance framework to oversee the implementation of a firm's "enterprise-wide" LIBOR transition program;
  • developing an enterprise-wide program that will mitigate risks associated with the transition and be designed specifically to meet each firm's needs;
  • implementing an enterprise-wide strategy that will increase levels of education for impacted stakeholders;
  • identifying and validating LIBOR-linked assets and exposures;
  • understanding and assessing the impacts of transitioning from LIBOR, in addition to implementing fallback provisions;
  • creating a strategy for redesigning or transitioning the current portfolio of LIBOR products, with consideration of the new usage of products based on SOFR;
  • maintaining procedural and oversight routines to manage both financial and non-financial routines;
  • addressing the implications resulting from the LIBOR transition with operational and technology readiness plans; and
  • determining (i) accounting and reporting considerations and (ii) tax and regulatory considerations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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