Board of Governors of the Federal Reserve System
Consumer Financial Protection Bureau
Federal Deposit Insurance Corporation
National Credit Union Administration
Office of the Comptroller of the Currency
State Bank and Credit Union Regulators
October 20, 2021
Joint Statement on Managing the LIBOR Transition

PurposeFive federal financial institution regulatory agencies,1 in conjunction with the state bankand state credit union regulators, (collectively, agencies) are jointly issuing this statement
to emphasize the expectation that supervised institutions with LIBOR exposure continue
to progress toward an orderly transition away from LIBOR. Additionally, this statement
includes clarification regarding new LIBOR contracts, considerations when assessing
appropriateness of alternative reference rates, and expectations for fallback language.
Failure to adequately prepare for LIBOR’s discontinuance could undermine financial
stability and institutions’ safety and soundness and create litigation, operational, andconsumer protection risks.
Background Information
On July 1, 2020, the Federal Financial Institutions Examination Council (FFIEC) issued astatement 2 that highlighted the financial, legal, operational, and consumer protection risks
that will result from the LIBOR’s discontinuation. The FFIEC statement encouraged
supervised institutions to continue their efforts to prepare for the change and address risks
associated with the LIBOR transition.
On March 5, 2021, the United Kingdom Financial Conduct Authority (FCA) andIntercontinental Exchange (ICE) Benchmark Administration (IBA) announced 3 that theone-week and two-month U.S. dollar (USD) LIBOR settings will cease to be published
immediately after December 31, 2021. The publication of overnight and one-, three-,six-, and 12-month USD LIBOR settings will be extended through June 30, 2023, which
will provide additional time to wind down or renegotiate existing contracts that reference
these LIBOR settings. Importantly, the extension of publication for certain USD LIBOR

The agencies are the Board of Governors of the Federal Reserve System (Board), Federal Deposit
Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), the National Credit
Union Administration (NCUA), and the Consumer Financial Protection Bureau (CFPB).
2
See FFIEC - Joint Statement on Managing the LIBOR Transition
1

3 See FCA announcement on future cessation and loss of representativeness of the LIBORbenchmarks-1-rates is not an indication that any of the extended USD LIBOR rates will be subsequently
published after June 30, 2023.
The Board, FDIC, and OCC previously communicated that a supervised institution may
use any reference rate for its loans that the institution’s management determines isappropriate based on its funding model and customer needs.4 Separately, the OCC,
Board, and FDIC issued a joint statement 5 that encouraged supervised institutions tocease entering into new contracts that use USD LIBOR as a reference rate as soon aspracticable, but no later than December 31, 2021. The NCUA issued similar guidance
encouraging institutions to transition away from using USD LIBOR as a reference rate assoon as possible, but no later than December 31, 2021, and to ensure existing contracts
have robust fallback language that includes a clearly defined alternative reference rate.6
Supervisory Considerations
Clarification on the meaning of new LIBOR contracts
Given LIBOR’s discontinuance, the agencies believe that entering into new contracts,
including derivatives, that use LIBOR as a reference rate after December 31, 2021, would
create safety and soundness risks, including litigation, operational, and consumer
protection risks. For this purpose, a new contract would include an agreement that (i)creates additional LIBOR exposure for a supervised institution or (ii) extends the term ofan existing LIBOR contract. 7 A draw on an existing agreement that is legally
enforceable (e.g., a committed credit facility) would not be viewed as a new contract.
Additionally, considering the narrowing timeline involved, contracts entered into on orbefore December 31, 2021, should either use a reference rate other than LIBOR or havefallback language that provides for use of a strong and clearly defined alternativereference rate after LIBOR's discontinuation.
Considerations when assessing the appropriateness of alternative reference rates
Safe-and-sound practices include conducting the due diligence necessary to ensure thatalternative rate selections are appropriate for the supervised institution’s products, risk
profile, risk management capabilities, customer and funding needs, and operational
capabilities. As part of their due diligence, supervised institutions should understand howtheir chosen reference rate is constructed and be aware of any fragilities associated withthat rate and the markets that underlie it.
See OCC Bulletin 2020-98; Federal Reserve Supervision and Regulation (SR) Letter 20-25; and FDIC
Financial Institution Letter 104-2020.
5 Agency statements on the LIBOR transition: OCC Bulletin 2020-104; Federal Reserve SR 20-27; andFDIC PR-129-2020.
6
See NCUA Letter to Credit Unions 21-CU-03 (May 2021) and Supervisory Letter 21-01 (May 2021).
7The agencies recognize that there may be limited circumstances in which it would be appropriate for aninstitution to enter into new USD LIBOR contracts after December 31, 2021, such as (i) transactions
executed for purposes of required participation in a central counterparty auction procedure in the case of amember default, including transactions to hedge the resulting USD LIBOR exposure; (ii) market making in
support of client activity related to USD LIBOR transactions executed before January 1, 2022; (iii)transactions that reduce or hedge the institution’s or any client of the institution’s USD LIBOR exposure oncontracts entered into before January 1, 2022; and (iv) novations of USD LIBOR transactions executed
before January 1, 2022.
4-2-Expectations for fallback language
Supervised institutions are advised to identify all contracts that reference LIBOR, lackadequate fallback language, and will mature after the relevant tenor ceases. Goingforward, supervised institutions are encouraged to include fallback language in new or
updated contracts that provides for using a strong and clearly defined fallback rate when
the initial reference rate is discontinued.
Additional considerations
Supervised institutions are reminded of previous agency communications 8 and areencouraged to take the following actions as they prepare for the LIBOR transition:••

develop and implement a transition plan for communicating with consumers, clients,and counterparties; andensure systems and operational capabilities will be ready for transition to a
replacement reference rate after LIBOR’s discontinuation.

Supervised institutions that take a comprehensive and proactive approach will be better
prepared for transitioning away from LIBOR. Supervisory focus and review willcontinue to increase as the LIBOR cessation date approaches.

For example, the Federal Reserve issued guidance (SR Letter 21-7) to assist examiners in assessing
supervised firms’ progress in transitioning away from LIBOR; the OCC issued guidance (OCC Bulletin2020-68) and a self-assessment tool (OCC Bulletin 2021-7) for supervised institutions to evaluate their
preparedness for LIBOR cessation; the Conference of State Bank Supervisors issued a self-assessment toolfor supervised institutions in September 2019 titled Ten Steps for LIBOR Transition; the NCUA issued aLetter to Credit Unions (May 2021, LTCU 21-CU-03) and a Supervisory Letter to field staff on the LIBOR
transition; the FDIC published a Supervisory Insights Journal Article (winter 2018) as a resource forsupervised institutions in addressing the LIBOR transition; and the CFPB issued a notice of proposed
rulemaking and a list of frequently asked questions relating to the LIBOR transition (June 4, 2020).
8-3-