SECTION 2. BACKGROUND

.01 LIBOR and other IBORs . On July 27, 2017, the Financial Conduct Authority, the United Kingdom regulator tasked with overseeing LIBOR, announced that all currency and term variants of LIBOR, including U.S.-dollar LIBOR (USD LIBOR), may be phased out after the end of 2021. The Financial Stability Board and the Financial Stability Oversight Council have publicly acknowledged that, in light of the prevalence of USD LIBOR as the reference rate in a broad range of financial instruments, the probable elimination of USD LIBOR has created risks that pose a potential threat not only to the safety and soundness of individual financial institutions but also to financial stability generally.

.02 The ARRC and SOFR . The ARRC, whose ex officio members include the Board of Governors of the Federal Reserve System, the Department of the Treasury (Treasury Department), the Commodity Futures Trading Commission, and the Office of Financial Research, was convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York to identify an alternative reference rate that would be more robust than USD LIBOR and that would comply with standards such as the International Organization of Securities Commissions’ “Principles for Financial Benchmarks.” After considering a comprehensive list of alternatives, the ARRC recommended the Secured Overnight Financing Rate (SOFR) as the replacement for USD LIBOR. Since April 3, 2018, the Federal Reserve Bank of New York has published SOFR daily.

.03 ARRC contract fallback language . The ARRC was also tasked with facilitating the voluntary acceptance of SOFR as the replacement for USD LIBOR. Many