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   * Meet the team
   * Join us
 * Candidates
   * Why Momenta
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   * What to expect
 * Clients
   * Why Momenta
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Next steps post LIBOR cessation for US markets
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NEXT STEPS POST LIBOR CESSATION FOR US MARKETS

 One month into the new year, we check-in to see how initial progress is shaping
up in the US post-LIBOR cessation period, and gauge how the US markets are
likely to continue to react as the year unfolds…

SOFR was first resisted by corporate treasurers and financial institutions, in
part because it did not reflect credit risk in the same manner that LIBOR does.
The Alternative Reference Rates Committee (ARRC), a body of banks, insurers, and
asset managers created by the New York Federal Reserve, endorsed the benchmark’s
forward-looking term structure on July 29, brightening the outlook for SOFR
implementation. Since then, the switch has gained traction.

Whilst bigger players have embraced SOFR adoption, others are taking a more
cautious approach, waiting to see what happens next. Smaller firms are still
looking at the bigger players to plan their next steps, but they should
seriously consider making transitional moves, and quickly.

Firms will need to address key concerns in 2022

The Alternative Reference Rates Committee (ARRC), which includes financial
institutions and the Federal Reserve, announced that it has identified a few
significant concerns where additional work would be required to enable a
seamless transition away from LIBOR. One of the concerns lays with LIBOR bases
futures.

The ARRC reiterated its recommendation for an end to the signing of new
LIBOR-linked financial contracts post deadline, suggesting that market
participants should be aware of and plan for the potential risk that liquidity
in LIBOR markets could fall beyond the deadline.

Another concern that remains is that LIBOR loans aren’t due to mature until
December 31st, 2022, and many borrowers and lenders have not adopted their first
SOFR loan until recently.

Some borrowers demand additional information about the pricing of SOFR-linked
loans, according to the committee, and it appears that smaller borrowers may be
provided fewer borrowing options than larger borrowers.

If you have not transitioned – do so now.

Firms that have not adequately transitioned post the 31st of December may be
subject to significant legal liabilities and other concerns. According to the
Financial Stability Oversight Council (FSOC), which includes leaders from
several federal agencies, including the Securities and Exchange Commission and
the Federal Reserve, market participants who do not execute plans for this
transition could face significant legal, operational, and economic risks.

Getting your post deadline efforts right, first time around, is critical

Regulators and governing bodies are serious about the issuance of penalties and
fines for those who have not fully transitioned to alternative reference rates.
Even with a passed deadline, key areas of concern will need to be addressed and
this usually requires external expertise and resource.

Momenta will provide additional resources for the main areas of the post-LIBOR
transition process, allowing you to focus on the project’s strategic oversight
while we assist you to put your vision into action.

This flexibility helps you to ensure that your team is constantly striking the
appropriate balance, resulting in a more effective solution that benefits your
end client’s results.

Throughout the post-LIBOR transition process, Momenta can provide fully built
teams to support in all key disciplines, including:

 * Identifying the contracts that need to be swapped
 * Re-papering according to an appropriate index rate
 * Reviewing fallback language
 * Calculating the fluctuated pricing in each contract due to the new IBOR
   attached to any calculation or swap
 * Contract negotiation and review
 * Communications to the end customer regarding their new rates

Additional skilled and experienced resource will help you to avoid wasted time
and help your clients transition their contracts to a new index on-time,
efficiently, and effectively.

If you are looking to finalise transitional efforts, get in touch to see how we
can help you achieve all your business’ LIBOR cessation goals.

 

 

WORKS CITED:

HTTPS://WWW.CFODIVE.COM/NEWS/REGULATORS-WARN-BIG-LEGAL-RISKS-COMPANIES-BOTCH-LIBOR-TRANSITION/611737/



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