1 ARRC Recommended Fallbacks for Implementation of its

ARRC Recommended Fallbacks for Implementation of its Hardwired Fallback Language

Selections and Recommendations of the Alternative Reference Rates Committee (ARRC)

as the “Relevant Governmental Body” under its recommended fallback language

with respect to overnight, 1-month, 3-month, 6-month, and 12-month USD LIBOR tenors

Published March 15, 2023

Background

Implementing the ARRC’s recommended hardwired fallback language requires verification of

certain recommendations made by the ARRC, including whether the ARRC has selected or

recommended a forward-looking term rate based on SOFR as a replacement for LIBOR for a given

cash product, the ARRC’s recommendations of spread adjustments to that would be applied for

non-consumer cash products in replacing LIBOR with SOFR under the terms of the contractual

fallbacks, and the ARRC’s recommendations of replacement indexes for use in consumer products

that reference LIBOR. This Statement sets out the ARRC’s selections and recommendations as

they apply to these specific contractual fallback provisions.

The ARRC has noted that its recommendations may also be adopted by parties that are able and

choose to use its recommended fallbacks in legacy LIBOR contracts in which the replacement rate

is determined by one or more parties to the contract rather than directly set by the terms of the

contract. This may include counterparties that have adopted “amendment approach” fallback

language for syndicated and bilateral business loans that the ARRC has previously issued. The

amendment approach does not prescribe a successor rate or spread adjustment and instead provides

for a streamlined amendment process for determining a successor rate and any spread adjustment.

Any use of the ARRC recommended fallbacks in these circumstances would be at the discretion

of the parties involved in the selection of a replacement rate, subject to the terms of the contract.

In instances of contract remediation (rather than reliance on hardwired contractual fallbacks), the

ARRC encourages counterparties to settle on the terms that are appropriate to them pursuant to the

terms of their contract. With respect to the efforts of counterparties to determine any margin or

spread adjustments in new SOFR contracts,, the ARRC has emphasized that its recommended

spread adjustments set out in this Statement were intended only for use in LIBOR contracts that

fall back to SOFR and that they would not and are not intended to apply to new contracts; the

ARRC encourages to counterparties to new contracts to determine any margin or spread

adjustments based on competitive market forces and their own circumstances.

The remainder of this Statement sets forth the specific recommendations and selections of the

ARRC. The ARRC notes that its recommendations match the Board-selected benchmark

replacements specified in the Federal Reserve Board’s rule implementing the Adjustable Interest

Rate (LIBOR) Act.

The ARRC selected Refinitiv to publish its recommended spread adjustments

and spread-adjusted rates and notes that all of the spread-adjusted-rate recommendations and

selections set out in this document are available through Refinitiv’s USD IBOR Cash Fallbacks.

While the ARRC’s amendment approach does not prescribe a successor rate or spread adjustment, it does provide

that due consideration be given to “any selection or recommendation of a replacement rate or the mechanism for

determining such a rate by the Relevant Governmental Body”; this language also includes due consideration to “any

evolving or then-prevailing market convention for determining a successor rate for LIBOR for U.S. dollar syndicated

loan facilities.”

Federal Register: Regulations Implementing the Adjustable Interest Rate (LIBOR) Act

I. Purpose. The Alternative Reference Rates Committee’s (ARRC) recommendations

regarding more robust fallback language (“ARRC-recommended fallback language”) for

new issuances of LIBOR contracts have been widely adopted. Implementation of the

contractual provisions in the ARRC-recommended fallback language requires the

determination of certain selections or recommendations made by a “Relevant

Governmental Body,” defined as the Board of Governors of the Federal Reserve System,

the Federal Reserve Bank of New York, or a committee endorsed or convened by the Board

of Governors of the Federal Reserve System or the Federal Reserve Bank of New York.

The ARRC, which has been convened by the Board of Governors of the Federal Reserve

System and the Federal Reserve Bank of New York, is therefore publishing this Statement

of selections and recommendations as the Relevant Governmental Body with respect to the

ARRC-recommended fallback language.

II. Scope. This Statement constitutes the selections and recommendations by the ARRC to

be applied in the determination of the Benchmark Replacement, the Benchmark

Replacement Adjustment, and the Recommended Replacement Index as these terms are used

in the ARRC’s recommended fallback language in any contract that (1) references the

overnight, 1-month, 3-month, 6-month, and/or 12-month tenors of USD LIBOR and (2)

which has incorporated one of the following versions of the ARRC’s recommended

fallback language (each a “Covered Contract”):

• Closed-end residential adjustable-rate mortgages

• Bilateral business loans (either hardwired version of the 2019 recommendations,

the 2020 recommendations, or the 2021 supplemental recommendations)

• Floating rate notes

• Securitizations (either the 2019 recommendations or a contract using these

recommendations but including the 2021 supplemental update of the definition of

a Benchmark Transition Event )

• Syndicated business loans (either the hardwired version of the 2019

recommendations, the 2020 recommendations, or the 2021 supplemental

recommendations)

• Variable-rate private student loans

III. Defined Terms. All capitalized terms used herein have the meaning set forth in this

Statement, including Appendix A hereto.

IV. Appendices. The following Appendices are an integral part of this Statement and all

references to “this Statement” shall include each Appendix, as applicable.

Appendix A - Definitions for Purposes of this Statement

Appendix B - ARRC Selections and Recommendations

A-1

Appendix A- Definitions for Purposes of this Statement

When used in this Statement, the following capitalized terms shall have the respective meanings

set forth below:

“Consumer Loan” means a consumer credit transaction. For purposes of this definition, the terms

“consumer” and “credit” have the meaning given those terms, respectively, under Section 103 of

the Truth in Lending Act, as amended.

“Federal Family Education Loan Program (FFELP) asset-backed securitization (ABS)”

means an asset-backed security for which more than 50 percent of the collateral pool consists of

FFELP loans, as reported in the most recent servicer report available on the first London banking

day after June 30, 2023, or the date the Board determines that any LIBOR tenor will cease to be

published or cease to be representative if it determines that a LIBOR tenor will cease to be

published or cease to be representative as of another date..

“Federal Housing Finance Agency (FHFA)-regulated entity” has the same meaning as

“regulated entity” in 12 U.S.C. 4502(20).

“FHFA-regulated-entity contract” means a Covered Contract that is a commercial or

multifamily mortgage loan that has been purchased or guaranteed, in whole or in part, by a FHFA-

regulated entity, or for which a FHFA-regulated entity is identified as a party in the transaction

documents and that is (i) a commercial or multifamily mortgage-backed security (other than a

security backed by consumer loans), (ii) a collateralized mortgage obligation, (iii) a credit risk

transfer transaction, or (iv) a Federal Home Loan Bank advance.

“30-day Average SOFR” means the 30-calendar-day compounded average of SOFR, as

published by the Federal Reserve Bank of New York or any successor administrator.

“90-day Average SOFR” means the 90-calendar-day compounded average of SOFR, as

published by the Federal Reserve Bank of New York or any successor administrator.

“Federal Housing Finance Agency (FHFA)-regulated entity” means the Federal National

Mortgage Association, the Federal Home Loan Mortgage Corporation, and any Federal Home

Loan Bank.

“Refinitiv Consumer Cash Fallback” means the spread-adjusted USD IBOR Refinitiv

Consumer Cash Fallback published as part of the Refinitiv “USD IBOR Cash Fallbacks” for

“Consumer” products, with the “Rate” of “All-in” and the “Tenor” of a period equal to the relevant

period. The spread adjustment included in this index has a transitional period for the initial year.

“SOFR” means the Secured Overnight Financing Rate published by the Federal Reserve Bank of

New York or any successor administrator.

“CME Term SOFR” means the Term SOFR Reference Rate published by the CME Group Inc.

for a specified tenor.

B-1

Appendix B - ARRC Selections and Recommendations

LIBOR Tenor Recommended Replacement Rate/Index

Recommended Spread

Adjustment

For any Covered Contract that is not a Consumer Loan, a FHFA-regulated-entity contract, or a

FFELP ABS

Overnight LIBOR SOFR 0.00644 percent

One-month LIBOR One-month CME Term SOFR 0.11448 percent

Three-month LIBOR Three-month CME Term SOFR 0.26161percent

Six-month LIBOR Six-month CME Term SOFR 0.42826 percent

Twelve-month LIBOR Twelve-month CME Term SOFR 0.71513 percent

For a Covered Contract that is a Consumer Loan

One-month LIBOR One-month Refinitiv Consumer Cash Fallback Not Applicable

Three-month LIBOR Three-month Refinitiv Consumer Cash Fallback Not Applicable

Six-month LIBOR Six-month Refinitiv Consumer Cash Fallback Not Applicable

Twelve-month LIBOR Twelve-month Refinitiv Consumer Cash Fallback Not Applicable

For A Covered Contract that is a FHFA-regulated-entity contract and that is not a Federal Home

Loan Advance

Overnight LIBOR SOFR 0.00644 percent

One-month LIBOR 30-Day Average SOFR 0.11448 percent

Three-month LIBOR 30-Day Average SOFR 0.26161percent

Six-month LIBOR 30-Day Average SOFR 0.42826 percent

Twelve-month LIBOR 30-Day Average SOFR 0.71513 percent

For a Covered Contract that is a FFELP ABS

One-month LIBOR 30-Day Average SOFR 0.11448 percent

Three-month LIBOR 90-Day Average SOFR 0.26161percent

Six-month LIBOR 30-Day Average SOFR

0.42826 percent

Twelve-month LIBOR 30-Day Average SOFR 0.71513 percent

Spread-adjusted rates incorporating the ARRC’s recommendations and selections are available through Refinitiv’s USD IBOR Cash Fallbacks.

The ARRC is unaware of any outstanding consumer loans referencing overnight SOFR. For the avoidance of doubt, a benchmark replacement

adjustment should not be added separately to the Refinitiv Consumer Cash Fallbacks because these replacement rates already include the ARRC’s

recommended spread adjustments.

The ARRC is unaware of any Federal Home Loan Bank Advance using ARRC-recommended fallback language.