Agencies Issue Statement on LIBOR Transition

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The Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency issued a joint statement encouraging banks to cease using the U.S. Dollar (USD) LIBOR on new transactions by Dec. 31, 2021 in order to facilitate an orderly—and safe and sound—LIBOR transition.

The agencies said that new contracts entered into before December 31, 2021 should either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation.

The regulators further indicated that if the administrator of LIBOR extends the publication of USD LIBOR beyond Dec. 31, 2021, the agencies recognize that there may be limited circumstances when it would be appropriate for a bank to enter into new USD LIBOR contracts after Dec. 31, 2021.

Also, on Nov. 30, the LIBOR's administrator, ICE Benchmark Administration Limited (IBA) issued a proposed plan to meet in early December to discuss its intentions to cease the publication of the USD LIBOR after Dec. 31, 2021. Under the IBA’s proposal, publication of the one week and two-month USD LIBOR settings would end immediately after Dec. 31, 2021; and the remaining USD LIBOR settings would end immediately after June 30, 2023. The three agencies said in their statement that the June 30, 2023 date for which IBA is consulting would allow time for "legacy contracts"—USD LIBOR transactions executed before Jan.1, 2022—to mature.

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