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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

 DIVISION OF SUPERVISION

 AND REGULATION

 DIVISION OF CONSUMER AND

 COMMUNITY AFFAIRS

 

SR 21-17

CA 21-15

October 20, 2021

Revised October 22, 2021

On October 22, 2021, this letter was re-issued as a joint letter with the Division of Consumer 

and Community Affairs. The attachment, Joint Statement on Managing the LIBOR Transition, 

was not revised.

TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE 

SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE BANK 

AND INSTITUTIONS SUPERVISED BY THE FEDERAL RESERVE

SUBJECT: Interagency Statement on Managing the LIBOR Transition

Applicability: This letter applies to all institutions supervised by the Federal Reserve, including 

those with $10 billion or less in consolidated assets.

On October 20, 2021, the Board of Governors of the Federal Reserve System, Federal Deposit 

Insurance Corporation, Office of the Comptroller of the Currency, the National Credit Union 

Administration, and the Consumer Financial Protection Bureau (collectively, the agencies) 

issued a statement (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 on the meaning of 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, and 

consumer protection risks.

Reserve Banks are asked to distribute this letter to the supervised organizations in their districts 

and to appropriate supervisory staff. Questions may be sent via the Board’s public website.

1

1 See http://www.federalreserve.gov/apps/contactus/feedback.aspx
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Michael S. Gibson Eric S. Belsky

Director Director

Division of Division of Consumer

Supervision and Regulation and Community Affairs

Attachments:

• Interagency Joint Statement on Managing the LIBOR Transition
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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

Purpose

Five federal financial institution regulatory agencies,1

 in conjunction with the state bank 

and 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, and 

consumer protection risks.

Background Information 

On July 1, 2020, the Federal Financial Institutions Examination Council (FFIEC) issued a 

statement2 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) and 

Intercontinental Exchange (ICE) Benchmark Administration (IBA) announced3 that the 

one-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 

1 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

3 See FCA announcement on future cessation and loss of representativeness of the LIBOR 

benchmarks
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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 is 

appropriate based on its funding model and customer needs.4

 Separately, the OCC, 

Board, and FDIC issued a joint statement5 that encouraged supervised institutions to 

cease entering into new contracts that use USD LIBOR as a reference rate as soon as 

practicable, 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 as 

soon 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 of 

an 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 or 

before December 31, 2021, should either use a reference rate other than LIBOR or have 

fallback language that provides for use of a strong and clearly defined alternative 

reference 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 that 

alternative 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 how 

their chosen reference rate is constructed and be aware of any fragilities associated with 

that rate and the markets that underlie it. 

4 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; and 

FDIC PR-129-2020. 6 See NCUA Letter to Credit Unions 21-CU-03 (May 2021) and Supervisory Letter 21-01 (May 2021). 7 The agencies recognize that there may be limited circumstances in which it would be appropriate for an

institution 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 a 

member 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 on 

contracts entered into before January 1, 2022; and (iv) novations of USD LIBOR transactions executed 

before January 1, 2022.
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Expectations for fallback language 

Supervised institutions are advised to identify all contracts that reference LIBOR, lack 

adequate fallback language, and will mature after the relevant tenor ceases. Going 

forward, 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 communications8

 and are 

encouraged to taking the following actions as they prepare for the LIBOR transition:

• develop and implement a transition plan for communicating with consumers, clients, 

and counterparties; and

• ensure 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 will 

continue to increase as the LIBOR cessation date approaches.

8 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 Bulletin 

2020-68) 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 tool 

for supervised institutions in September 2019 titled Ten Steps for LIBOR Transition; the NCUA issued a 

Letter 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 for 

supervised 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).