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New Broad Treasuries Repo Rate “Best Practice” Benchmark

June 29, 2017

Authors

Matthew D'Amico

New Broad Treasuries Repo Rate “Best Practice” Benchmark

June 29, 2017

by: Matthew D'Amico

On June 22, the Alternative Reference Rates Committee (the “ARRC”) identified a broad Treasuries repo financing rate (the “Broad Treasuries Financing Rate”) that, according to the ARRC, in its consensus view represents best practice for use in certain new U.S. dollar derivatives and other financial contracts.

The work of the ARRC grew out of the past instances of manipulation of the LIBOR market which caused a loss of confidence in LIBOR – particularly as it had previously been determined and reported – as a reliable interest rate benchmark.  That led the G20 to instruct the Financial Stability Board to review broadly-recognized interest rate benchmarks and devise a plan to ensure that the construction of these benchmarks are sound and used appropriately in the markets.  According to the Working Group

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BBA LIBOR No Longer Exists

February 5, 2014

Authors

Brian Devling

BBA LIBOR No Longer Exists

February 5, 2014

by: Brian Devling

Commercial and consumer loans commonly accrue interest at a rate calculated in reference to LIBOR, the London Interbank Offered Rate. LIBOR was designed to be the average interest rate that leading banks in London, England would charge other banks. The British Bankers Association (BBA) administered LIBOR and many loan documents refer to BBA LIBOR. Effective February 1, 2014, the BBA no longer administers LIBOR. The Intercontinental Exchange Benchmark Administration Ltd (ICE) now has responsibility for LIBOR. The handover is part of the fallout from the recent scandal caused by banks trying to manipulate LIBOR.

Going forward any references to BBA LIBOR in your loan document templates should be updated. There is no need to refer to the entity administering LIBOR. A general reference to the London Interbank Offered Rate should suffice. Even better, many loan documents refer to LIBOR as reported by Reuters because that is where the

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