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.
- 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
The European Banking Authority (EBA) published its work program for 2023 as well as the technical package for phase 3 of version 3.2 of its reporting framework.
The Board of Governors of the Federal Reserve System (FED) announced a pilot climate scenario analysis exercise for six largest banks in the U.S.
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
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.
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).