Featured Product

    US Agencies Urge Banks to Use Fallback Language in Legacy Contracts

    November 06, 2020

    US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to prepare for the use of alternative reference rates for their lending activities. The agencies reiterate that they are not endorsing a specific replacement rate for the London Inter-bank Offered Rate (LIBOR) for loans. For its loans, a bank may use any reference rate that it determines to be appropriate for its funding model and customer needs. However, the bank should include fallback language in its lending contracts to provide for the use of a robust fallback rate if the initial reference rate is discontinued.

    The Alternative Reference Rates Committee recommended the Secured Overnight Financing Rate (SOFR) as its preferred alternative for both cash and derivative transactions. The use of SOFR, however, is voluntary. Examiners will not criticize banks solely for using a reference rate other than the SOFR for loans. The agencies encourage banks to

    • determine appropriate reference rates for lending activities and begin transitioning loans away from LIBOR without delay.
    • accelerate outreach to lending customers to ensure that they are aware of, and prepared for, the transition from LIBOR.
    • consider any technical changes that might be required for internal systems to accommodate new reference rates or fallback rates.

     

    Related Links

    Keywords: Americas, US, Banking, LIBOR, Fallback Language, SOFR, Alternative Reference Rate Committee, Benchmark Reforms, US Agencies

    Related Articles
    News

    ECB Finds Banks Unprepared for Pillar 3 Climate Risk Disclosures

    The European Central Bank (ECB) published results of the 2022 supervisory assessment of climate-related and environmental risk disclosures among significant institutions (103) and a selected number of less significant institutions (28).

    April 21, 2023 WebPage Regulatory News
    News

    NCUA Assesses Credit Union Exposure to Climate-Related Physical Risks

    The National Credit Union Administration (NCUA) released a Research Note that examines the exposure of credit unions to climate-related physical risks. In a related development

    April 21, 2023 WebPage Regulatory News
    News

    EBA Issues Multiple Regulatory and Reporting Updates for Banks

    The European Banking Authority (EBA) is seeking comments, until July 31, 2023, on the draft Guidelines on the proposed common approach to the resubmission of historical data under the EBA reporting framework.

    April 21, 2023 WebPage Regulatory News
    News

    EC Adopts Regulation on Own Funds, Issues Other Updates

    The European Commission adopted Delegated Regulations on own funds and eligible liabilities, on requirements for the internal methodology under the internal default risk model

    April 20, 2023 WebPage Regulatory News
    News

    CDP Platform to Report Plastic-Related Impact, Issues Other Updates

    The Carbon Disclosure Project (CDP) announced that its global environmental disclosure platform has enabled reporting on plastic-related impact for nearly 7,000 companies worldwide

    April 19, 2023 WebPage Regulatory News
    News

    IASB to Enhance Reporting of Climate Risks, Proposes IFRS 9 Amendments

    The International Accounting Standards Board (IASB) updated its work plan to enhance the reporting of climate-related risks in the financial statements,

    April 19, 2023 WebPage Regulatory News
    News

    BIS Addresses Data Gaps and Macro-Prudential Policy for Climate Risks

    The Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) published a brief paper that examines challenges associated with the use of macro-prudential policies to address climate-related financial risks.

    April 17, 2023 WebPage Regulatory News
    News

    FCA Sets Out Business Plan, Launches TechSprint on Greenwashing

    The Financial Conduct Authority (FCA) published its business plan for 2023-24. The plan sets out details of the work planned for the next 12 months to achieve better outcomes for consumers and markets

    April 17, 2023 WebPage Regulatory News
    News

    UK Committee Sets Out Recommendations for Next Phase of Open Banking

    The Joint Regulatory Oversight Committee (JROC), comprising the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) as co-chairs and the HM Treasury and the Competition and Markets Authority (CMA) as members

    April 17, 2023 WebPage Regulatory News
    News

    ECB Publishes Multiple Regulatory Updates for Banking Institutions

    The European Central Bank (ECB) published the results of the 2022 climate risk stress test of the Eurosystem balance sheet,

    April 17, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8873