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On March 9, 2021, the US Board of Governors of the Federal Reserve System (“FRB”) issued SR 21-7, Assessing Supervised Institutions’ Plans to Transition Away from the Use of the LIBOR, providing guidance to its bank examiners on how to assess the progress of supervised institutions in preparing to transition away from U.S. dollar (USD) LIBOR as a reference rate.[1] This guidance is intended to complement the Interagency Statement on LIBOR Transition that FRB issued in November 2020, which encouraged supervised firms to cease entering into new contracts that reference LIBOR as soon as practicable and noted that entering into such contracts after December 31, 2020, would create safety and soundness risks.
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Continue Reading US FRB Issues Examiner Guidance for Assessing LIBOR Transition Progress

New year 2021 and 2020 on sandy beach with waves

In testimony on Wednesday, February 24, 2021 before the United States House of Representatives Committee on Financial Services, the Chairman of the Board of Governors of the Federal Reserve System, Jerome Powell, responded to questions regarding LIBOR transition from Representative Brad Sherman (D-CA), Chairman of the Investor Protection, Entrepreneurship and Capital Markets Subcommittee. Sherman had asked Powell: “In your view, is it necessary to have federal legislation to have a smooth transition after June 2023 when LIBOR is no longer published?”
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Continue Reading US FRB Chair Powell Signals Support for Federal LIBOR Transition Assistance Legislation

Action Plan 2021 Directional Road Sign On Yellow Background

On February 10, 2021 (and updated on October 18, 2021), the Office of the Comptroller of the Currency (“OCC”) released a self-assessment tool to assist the institutions that it regulates in preparing for the expected cessation of the London InterBank Offered Rate (“LIBOR”).[1]
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Continue Reading OCC Releases LIBOR Transition Self-Assessment Tool

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The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (collectively, the “Agencies”) released an Interagency Statement on Reference Rates for Loans on November 6, 2020, in which they reiterated that they do not endorse SOFR—the Secured Overnight Financing Rate—or any other specific replacement rate for the London Interbank Offered Rate (“LIBOR”), for use in loan transactions.
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Continue Reading “To SOFR or Not to SOFR?”: Prudential Banking Regulators Encourage Fallback Provisions to an “Appropriate” LIBOR Replacement Rate

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In a detailed 25-page memorandum to U.S. prudential banking regulators,[1] the Alternative Reference Rates Committee detailed concerns regarding the transition from LIBOR to SOFR and possible effects on current U.S. bank regulatory capital and liquidity requirements. In the memorandum, the ARRC makes several preliminary recommendations regarding changes to such requirements, in order to facilitate such transition and avoid unintended disincentives or other adverse regulatory consequences.
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Continue Reading ARRC Requests Changes to Bank Regulatory Capital and Liquidity Requirements to Facilitate Transition from LIBOR to SOFR

The Index of Swaps on The Screen.

On October 13, 2020, the Division of Market Oversight of the Commodity Futures Trading Commission (“CFTC”) issued swap transaction and pricing data reporting relief to specific derivatives clearing organizations (“DCOs”) and market participants participating in upcoming DCO auctions that will help transition certain cleared swaps from discounting using the Effective Federal Funds Rate to the Secured Overnight Financing Rate. This discounting transition is an essential part of the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate, and other interbank offered rates, to swaps that reference alternative benchmarks.
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Continue Reading US CFTC Provides Reporting Relief for Swaps Related to Upcoming DCO Auctions Required for LIBOR Transition