Top regulators from the SEC, the OCC, the CFTC, the Federal Reserve and the Department of the Treasury spoke in unison at an eventful meeting of the Financial Stability Oversight Counsel on June 11, 2021.
(1) if you are a regulated bank that is delaying transition in hope that alternatives to SOFR will develop, the OCC is coming for you. The warning was expressed in more cordial terms than that, but no one wants to be unprepared when the OCC comes knocking.
(2) The chair of the SEC, who was also the co-chair of the IOSCO group that wrote the 2013 IOSCO principles by which replacement rate benchmarks are measured, doesn’t believe that Bloomberg’s BSBY rate meets the standard. This bluntly worded statement is at odds with the self-certification by Bloomberg, which was confirmed by an “assurance review” of an unnamed “global, independent accounting firm” in April. Awkward, to say the least.
(3) Although not mentioned by name, Ameribor appeared to get a pass, at least for now. Lenders and borrowers in non-capital markets are free to choose among rates that meet their needs, as long as it’s not BSBY. So are lenders and borrowers in the capital markets, as long as it’s SOFR.
The actual prepared statements are more engaging and provide useful insight. We take a deeper dive in our recent Alert.