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ARTICLE · 25 NOVEMBER 2020

Federal Banking Regulators Issue Statement On Loan Reference Rates And Advise Prompt Transition From LIBOR

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The Fed, FDIC, and OCC have issued a "Statement on Reference Rates for Loans" that addresses replacement rates for the London Inter-Bank Offered Rate

United StatesFinance and Banking
John L. Culhane, Jr.
John L. Culhane, Jr.
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The Fed, FDIC, and OCC have issued a "Statement on Reference Rates for Loans" that addresses replacement rates for the London Inter-Bank Offered Rate (LIBOR). LIBOR, which many creditors currently use as the index for calculating the interest rate on credit cards and other variable-rate consumer credit products, is expected to be discontinued sometime after 2021.

In July 2020, the Federal Financial Institutions Examination Council issued a "Joint Statement on Managing the LIBOR Transition." The statement highlighted the financial, legal, consumer protection, and operational risks that will result from LIBOR's expected discontinuation. It indicated that new loan contracts should either use a reference rate other than LIBOR or have fallback language that includes an alternative reference rate after LIBOR's discontinuation. The Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York has been recommended by the Alternative Reference

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