Examiner Guidance for Assessing LIBOR Transition Efforts at Supervised Firms with

$100 Billion or More in Total Consolidated Assets.

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As part of continuous monitoring of large firms, examiners should evaluate preparedness

for the LIBOR transition based on the considerations described below. Examiners should

document findings regarding LIBOR preparedness in workpapers and summarize those findings,

along with any recommendations for board or management attention, in examination reports.

Examiners should invite their state and federal supervisory counterpartsto participate in

monitoring meetings and, if requested, should assist in assessing preparedness during

examinationsled by other supervisory agencies. If necessary, examiners should conduct work at

a holding company or its nonbank subsidiary(s) to assess the overall preparedness of the

consolidated organization. To the fullest extent possible, examiners should rely on assessments

completed by primary supervisors of lead depository institutions [Footnote 1

- 12 CFR 225.2(h) End of Footnote 1.]

in their assessment of a

consolidated organization's LIBOR preparedness. [Footnote 2

- Examiners should also rely, to the fullest extent possible, on assessments of LIBOR preparedness completed by the

SEC, CFTC, or State regulatory agencies in the case of subsidiaries that are functionally regulated subsidiaries under

the Bank Holding Company Act. 12 U.S.C. 1844(c)(5). End of Footnote 2.]

Large holding companies are likely to have significant exposure to LIBOR and 

examination work may be needed to assess their readiness for the transition. If assessments

suggest a firm is lagging in its LIBOR preparedness or may not be able to address its exposures

in a timely manner, examiners should plan to conduct, or request that the primary supervisor

conduct, additional targeted reviews for the organization before the end of 2021.

Examination considerations:

A supervised firm with exposure to LIBOR and $100 billion or more in total consolidated assets [Footnote 3

- This includes FBOs with more than $100 billion in consolidated U.S. assets. End of Footnote 3.]

should prepare for the LIBOR transition with respect to six key areas:

1. Transition plan: The firm should have a LIBOR transition plan that includes a

governance structure that clearly defines roles and responsibilities needed to execute the

plan and a project roadmap with defined timelines and milestones.

a. The plan should align with the firm's risk management function across business

and product lines and cover all geographies relevant to the firm.

b. The governance structure specified in the plan should designate a specific group

(existing or new) to oversee the plan with appropriate senior-level oversight,
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including involvement from affected business lines and the funds management

(e.g., treasury, asset-liability committee), risk management and audit functions.

c. The plan should address how the firm will identify and address both financial

impacts and operational gaps in order to complete the plan.

d. The firm should define, and identify within the plan, contingencies that could 

impact the success of the plan or of components of the plan.

e. Senior leadership of the firm should provide appropriate budget and personnel

resources to support implementation of the plan and to avoid timeline delays.

f. The plan should address how the oversight and independent review/internal audit

functions will effectively review LIBOR transition project status, reporting,

timelines, and milestones.

2. Financial exposure measurement and risk assessment: The firm should accurately

measure its financial exposures to LIBOR. Exposure measurement should include any

financial product that references LIBOR and may include, but is not limited to,

investments, derivatives, and loans.

a. Exposure measurement should identify exposures by product, counterparty, and

business line. The firm should identify what exposures are proprietary or

custodial.

b. The firm should have adequate controls and review processes in place to maintain

a reasonable level of reporting accuracy and completeness.

c. Exposure measurement reporting should be frequent, for example quarterly.

d. The firm should have the ability to identify the proportion of its LIBOR exposure

that will run off before the relevant tenor ceases (either December 31, 2021 or

June 30, 2023). The firm should be able to highlight valuation and hedging

challenges resulting from switching from LIBOR to an alternative rate.

e. Foreign firms should measure LIBOR exposures booked and/or managed within

U.S. operations. Foreign firms should also be able to quantify exposures within

the U.S. operations in comparison to the LIBOR exposure of the consolidated

foreign parent.

3. Operational preparedness and risk control: The firm should identify all internal and

vendor-provided systems and models that use or require LIBOR as an input and make
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necessary adjustments to provide smooth operation ofthose systems and models ahead of

cessation ofLIBOR.

a. The firm should have a complete inventory ofaffected systems and models,

ranked by criticality or significance.

b. Where the firm uses vendor-provided systems, the firm should confirm with the

service provider that necessary updates will be available for testing and

implementation before December 31, 2021.

c. The firm should establish a contingency plan in the event that a service provider is

unable to deliver a solution in a timely manner.

d. Any changes made by the firm to models should adhere to sound model risk

management practices as described in SR Letter 11-7, and progress reporting

should be included in the firm's transition plan.

4. Legal contract preparedness: The firm should identify all contracts that reference LIBOR

and refrain from entering into contracts without fallback language.

a. The firm should identify contracts that lack fallback language that defines an

alternative reference rate after LIBOR is no longer available.

b. For contracts that lack adequate fallback language and will mature after the

relevant tenor ceases (either December 31, 2021 or June 30, 2023), the firm's

transition project plans should address how the firm will determine the impact of

LIBOR's cessation on these contracts and the steps the firm will take to address

these contracts prior to LIBOR's cessation. Given that one objective ofthe

extension of certain LIBOR tenors was to allow more time for the development of

transition plans for such contracts, examiners should recognize that these plans

will become more detailed as the relevant cessation date approaches. Firms

should show credible progress in developing their plans during this period, and

should have complete plans well before the cessation date of any particular tenor

(for example, six months).

c. If a firm is a major user of derivatives, it should consider adhering to the

International Swaps and Derivatives Association (ISDA) IBOR Fallback Protocol

and IBOR Fallback Supplement (together, the Protocol) to implement robust

fallbacks for legacy and new derivative contracts. [Footnote 4

- SR Letter 20-22 ISDA IBOR Fallback Protocol and IBOR Fallback Supplement End of Footnote 4.]

The firm should also track
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customers who will not adopt the Protocol and take action to mitigate associated

risks.

d. New LIBOR-based contracts entered into before December 31, 2021 should have

robust fallback language that includes a clearly defined alternative reference rate

after LIBOR is no longer available. [Footnote 5

- As noted in SR Letter 20-25, a firm may use any reference rate for its loans that the firm determines to be

appropriate for itsfunding model and customer needs. Fallback language may identify a clear mechanism for

selecting an alternative rate if the parties believe that an appropriate alternative rate is not currently available. End of Footnote 5.]

e. Any firm that invests in syndicated loans should work with its relevant agent

banks to ensure that the agent banks appropriately address fallback language in

syndicated loan contracts.

5. Communication: The firm should communicate to its counterparties, clients, consumers,

and internal stakeholders about the LIBOR transition. The firm should ensure compliance

with requirements ofthe Truth in Lending Act and other applicable laws and regulations

and with the prohibition on engaging in Unfair or Deceptive Acts or Practices.

a. The firm should implement training for employees to inform all relevant staffof

the LIBOR transition, how the LIBOR transition will affect staffwork, and, if

applicable, how staff are to communicate the implications ofthe LIBOR transition

externally.

b. The firms should provide regular updates to key stakeholders during the transition

period covered by the plan.

6. Oversight: The group designated to oversee the transition plan (as described in 1.b),

should ensure timely updates to senior management and the board ofdirectors.

a. The group should provide regular updates on plan progress and alerts regarding

any significant/material delays in plan progress, including gaps or obstacles that

could impede plan completion. Any reporting should be timely and include

financial exposures as well as inventories oflegal contracts referencing LIBOR.

b. Ifthe firm is a foreign entity with U.S. total assets over $100 billion, the firm

should provide updates on LIBOR transition efforts to the U.S. ChiefRisk Officer

and the U.S. Risk Committee.

c. The board should hold senior management accountable for effectively

implementing the firm's plan.

Examiners should review the internal plans ofsupervised firms to ensure that firms identify and

mitigate risks related to their LIBOR exposures. Examiners should discuss with the firm its

plans for addressing LIBOR exposures and evaluate whether the firm has a plan in place to

transition away from entering into new LIBOR-based financial contracts after December 31,

2021.