LIBOR Transition Statement

John Zasada, Compliance Consulting Director, Financial Institutions Group

On Nov. 30, 2020, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) (the agencies) issued a statement encouraging banks to transition away from using the LIBOR as soon as practicable.

The administrator of LIBOR has announced it will cease the publication of the one-week and two-month LIBOR settings immediately following the LIBOR publication on Dec. 31, 2021, and the remaining LIBOR settings immediately following the LIBOR publication on June 30, 2023. The agencies are encouraging banks to cease entering into new contracts using LIBOR as a reference rate as soon as practicable and in any event by Dec. 31, 2021.

The agencies believe entering into new contracts using LIBOR as a reference rate after Dec. 31, 2021, would create safety and soundness risks. New contracts entered into before Dec.31, 2021 should either utilize a reference rate other than LIBOR or have fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation.

If you have questions about how this impacts your institution, contact Doeren Mayhew’s regulatory compliance specialists.