June 22 (Reuters) - A committee of large international banks on Thursday voted to adopt an interest rate benchmark from the Treasuries-backed repurchase agreement market (repo) as an alternative to the use of Libor in around $150 trillion worth of derivatives.
The Alternative Reference Rates Committee (ARRC) was tasked with selecting a new rate at the behest of regulators including the Federal Reserve who worried that a decline in short-term bank lending since the 2008 financial crisis undermined faith in Libor, and posed risks to the trillions of dollars of derivatives backed by the rate.
Repo was selected over the Overnight Bank Funding Rate (OBFR), an unsecured bank lending rate based on transactions in the federal funds and Eurodollar markets.
The ARRC said that repo was considered the most appropriate rate after considering the depth and robustness of the market as well as other factors including regulatory principles. (Reporting by Karen Brettell; Editing by Sandra Maler)