On November 30, 2020, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued a statement encouraging banks to shift away from using US Dollar LIBOR. Perhaps in response to speculation earlier this month as to a delay in the cessation of US Dollar LIBOR, the statement referenced the announcement by ICE Benchmark Administration, the administrator for LIBOR, that new one-week and two-month US Dollar LIBOR rates will cease being published after December 31, 2021, and all other US Dollar LIBOR rates will cease being published after June 30, 2023. Although the publication of certain US Dollar LIBOR tenors will extend until June 30, 2023, the statement noted that the purpose of the extension is to allow most legacy US Dollar LIBOR contracts to mature before disruptions to US Dollar LIBOR are to occur. In connection with ICE Benchmark Administration’s announcement, the agencies encouraged banks to start using reference rates other than US Dollar LIBOR or to provide a clear alternate reference rate in new contracts by no later than December 31, 2021. While the agencies did acknowledge a brief list of circumstances in which it is appropriate for new bank contracts to use US Dollar LIBOR rates after that date, they advised that banks shifting away from US Dollar LIBOR as soon as practicable is critical for an orderly LIBOR transition.
If you would like further information about this or any other matter, please contact any member of the Global Bank and Institutional Finance & Restructuring Group or the LIBOR Transition Task Force.