FED Publishes Guidance to Assess LIBOR Transition Efforts of Firms
FED published guidance to assist examiners in assessing the supervised firms’ progress in preparing for LIBOR transition. Separate guidance has been published for institutions with less than USD 100 billion in total consolidated assets and for institutions with USD 100 billion or more in total consolidated assets. Institutions with less than USD 100 billion in total consolidated assets generally have less material and less complex LIBOR exposures. However, institutions with USD 100 billion or more in total consolidated assets generally have more significant and complex LIBOR exposures and should develop more detailed transition plans. Examiners should review the supervised firms’ planning for, and progress in, moving away from LIBOR during examinations and other supervisory activities in 2021.
The guidance outlines the factors that examiners should consider in assessing key aspects of transition efforts. A supervised firm with exposure to LIBOR should prepare for the LIBOR transition with respect to six key areas. The firm should:
- Have a LIBOR transition plan that includes a governance structure that clearly defines roles and responsibilities needed to execute the plan and a project roadmap with defined timelines and milestones
- Accurately measure financial exposures to LIBOR while exposure measurement should include any financial product that references LIBOR and may include, but is not limited to, investments, derivatives, and loans
- Identify all internal and vendor-provided systems and models that use or require LIBOR as an input and make necessary adjustments to provide smooth operation of those systems and models ahead of cessation of LIBOR
- Identify all contracts that reference LIBOR and refrain from entering into contracts without fallback language
- Communicate to the counterparties, clients, consumers, and internal stakeholders about the LIBOR transition and ensure compliance with requirements of the Truth in Lending Act and other applicable laws and regulations
- Provide the plan to applicable management, along with regular status updates to senior management
The guidance stipulates that examiners should discuss, with the firm, its plans for addressing LIBOR exposures and evaluate whether the firm has a plan in place to transition away from entering into new LIBOR-based financial contracts after December 31, 2021. Examiners should consider issuing supervisory findings and other supervisory actions if a firm is not ready to stop issuing LIBOR-based contracts by December 31, 2021.
Related Links
- Notification
- Guidance for Firms with Less Complex Exposures (PDF)
- Guidance for Firms with Complex Exposures (PDF)
Keywords: Americas, US, Banking, Securities, LIBOR, Guidance, Benchmark Reforms, FED
Related Articles
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
PBC Issues List of Systemic Banks, Adds 2 Foreign Banks to CERB List
The China Banking and Insurance Regulatory Commission (CBIRC) published the administrative measures for internal control of wealth management companies, which come into force on the day of promulgation.
PRA Publishes Discussion Paper on Its Future Approach to Policy
The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill.
ECB Publishes Opinion on Proposed Regulation on Data Act
The European Central Bank (ECB) published its opinion on the proposal for a regulation on harmonized rules on fair access to and use of data (Data Act).
