Supporting integrity, efficiency, and resiliency in the use of interest rate benchmarks (reference rates) – such as the now-defunct London Interbank Offered Rate (LIBOR) – across financial markets is the aim of a new committee announced Thursday by the Federal Reserve Bank of New York.
The New York Fed said that the Reference Rate Use Committee (RRUC) will convene private market participants but will be sponsored by the central bank branch.
The first meeting of the RRUC is set for Oct. 9, the New York Fed said.
The bank also said the committee’s work will cover those reference rates “produced and administered by the New York Fed,” apparently referring to the Secured Overnight Financing Rate (SOFR), a reference rate developed by the Federal Reserve (and the New York Fed specifically) as a replacement for LIBOR. SOFR was developed by the bank-sponsored group the Alternative Reference Rates Committee (ARRC).
The development of the RRUC was first mentioned in the final report of the ARRC in November 2023, the New York Fed said.
“The RRUC will focus on key issues regarding reference rates, including how their use is evolving and how the markets underpinning them may be changing too,” the New York Fed said in a release. The committee, it added, “will promote best practices related to the use of reference rates, including the recommendations set out by the ARRC amid the transition away from LIBOR.”
LIBOR was abandoned as a suitable reference rate in June 2023 after it was found no longer reflective of market conditions. The ARRC developed SOFR as one alternative for banks and other institutions to use for LIBOR. Since then, SOFR has emerged as one of the most widely used alternative reference rate.
“Reflecting on lessons learned from LIBOR – including the benefit of having a strong global private and public sector partnership – the RRUC is being launched to continue fostering engagement with industry on important issues related to the use of reference rates in the post-LIBOR world,” the New York Fed said.
The New York Fed said it expects the RRUC to “typically meet a few times per year.”