London Interbank Offered Rate (LIBOR) Transition
The transition away from LIBOR as a reference rate benchmark poses financial, legal, operational, and consumer protection risks for institutions with exposure. Exposure is generally measured as the size of any activity and the number of counterparties or consumers with financial contracts that reference LIBOR across all products. It is important that institutions with LIBOR exposure have appropriate risk management processes in place to identify and mitigate transition risks.
Laws and Regulations
Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.
- Part 349 Derivatives — Appendix A Margin and Capital Requirements for Covered Swap Entities (also known as the Swap Margin Rule) establishes initial and variation margin requirements for covered swap entities
Relevant Federal Register Notice incorporated into Part 349 that describes the basis and purpose of the rule and its revisions
Margin and Capital Requirements for Covered Swap Entities
permit swaps entered into prior to an applicable compliance date (legacy swaps) to retain their legacy status in the event that they are amended to replace an interbank offered rate (IBOR) or other discontinued rate
- Adjustable Interest Rate (LIBOR) Act (part of the Consolidated Appropriate Act, 2022)
FRB Regulation Implementing the Adjustable Interest Rate (LIBOR) Act
Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe-and-sound operations.
- Joint Statement on Completing the LIBOR Transition issued on April 26, 2023, reminds supervised institutions that U.S. dollar (USD) London Inter-Bank Offered Rate (LIBOR) panels will end on June 30, 2023 and reiterates that institutions with USD LIBOR exposure should complete their transition of remaining LIBOR contracts as soon as practicable. As noted in prior interagency statements, failure to adequately prepare for LIBOR's discontinuance could undermine financial stability and institutions' safety and soundness and create litigation, operational, and consumer protection risks.
- Joint Statement on Managing the LIBOR Transition issued October 20, 2021, emphasizes the expectation that supervised institutions with LIBOR exposure continue to progress toward an orderly transition away from LIBOR, includes clarification regarding new LIBOR contracts, considerations when assessing appropriateness of alternative reference rates, and expectations for fallback language
Answers to Frequently Asked Questions about the Impact of LIBOR Transitions on Regulatory Capital Instruments
(Issued July 29, 2021)
Joint Statement on LIBOR Transition
issued November 30, 2020, encourages banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021
Joint Statement on Reference Rates for Loans
issued November 6, 2020, reminds institutions that the federal banking agencies are not endorsing a specific replacement rate for LIBOR for loans and of the importance of robust fallback language in loan contracts
Joint Statement on Managing the LIBOR Transition issued July 1, 2020,
highlights potential risks that may result from the expected discontinuation of LIBOR and its use as a reference rate, and encourages institutions to continue preparing for the transition
Consumer Financial Protection Bureau LIBOR Transition Resources
issued December 7, 2021, includes resources to help industry understand, implement, and comply with regulatory requirements when transitioning from the LIBOR index, including the LIBOR Transition Rule in Regulation Z.
Supplemental information and guidance related to safe and sound banking operations.
Informational videos and recordings of prior webcasts and teleconferences.