Examiner Guidance for Assessing LIBOR Transition Efforts at Firms with Less Than $100

Billion in Total Consolidated Assets Supervised by the Federal Reserve

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During regularly scheduled Federal Reserve-led examinations of holding companies,

state member banks and U.S. branches and agencies of foreign banks for 2021, examiners should

evaluate preparedness for the LIBOR transition based on the considerations described below.

Examiners should document findingsregarding LIBOR preparedness in workpapers and

summarize those findings, along with any recommendations for board or management attention,

in examination reports.

Examination work should be tailored to the size and complexity of the LIBOR exposures.

For most firms with less than $100 billion in total consolidated assets, exposuresto LIBOR are

modest and reviews should be narrowly focused while using the considerations listed below as a

guide when planning examination work. LIBOR exposures may be significant at larger firms

and foreign banking organizations and, as a result, require more supervisory scrutiny— 

particularly for firms with more capital markets activities or broker-dealer affiliates.

If necessary, examiners should conduct work at a holding company or its nonbank

subsidiary(s) to assess the overall preparedness of the consolidated organization. [Footnote 1

- SR Letter 13-21, Inspection Frequency and Scope Requirements for Bank Holding Companies and Savings and

Loan Holding Companies with Total Consolidated Assets of $10 Billion or Less, provides guidance regarding 

inspections of holding companies with $10 billion or less in total consolidated assets. End of Footnote 1.]

To the fullest

extent possible, examiners should rely on assessments completed by primary supervisors of lead

depository institutions [Footnote 2

- 12 CFR 225.2(h). End of Footnote 2.]

in their assessment of a consolidated organization's LIBOR

preparedness. [Footnote 3

- SR Letter 16-4, Relying on the Work ofthe Regulators ofthe Subsidiary Insured Depository Institution(s) ofBank

Holding Companies and Savings and Loan Holding Companies with Total Consolidated Assets ofLess than $50

Billion. Examiners should also rely, to the fullest extent possible, on assessments ofLIBOR preparedness

completed by the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (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 3.]

Examiners should invite their state supervisory counterparts to participate in any targeted

examinations and, if requested, should assist in assessing preparedness during state-led

examinations. Examiners should also collaborate with other federal regulators as appropriate.

Examination considerations:

A supervised firm with exposure to LIBOR and less than $100 billion in total assets [Footnote 4

- This includes foreign banking organizations (FBOs) with consolidated U.S. assets ofless than $100 billion. End of Footnote 4.]
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product lines tied to LIBOR should maintain plans with greater detail and a project

roadmap that defines transition timelines and milestones.

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

measure its financial exposures to LIBOR and report the exposure to senior management.

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

vendor-provided systems and models that use or require LIBOR as an input and, if

possible, make necessary adjustments to maintain smooth operation ofthose systems and

models ahead ofthe cessation ofLIBOR. The firm should establish a contingency plan in

the event that its service provider is unable to deliver a solution in a timely manner.

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

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.]

The firm's transition plans should address how the firm will

determine the impact ofLIBOR's cessation on its contracts and the steps the firm will

take to modify these contracts prior to LIBOR's cessation.

5. Communication: Commensurate with its exposure to LIBOR, 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.

6. Oversight: The firm should provide the plan (as described in 1) to applicable

management, [Footnote 6

- For a foreign bank's U.S. operations this could include the country head, U.S. executive, branch manager, or other

leadership function. End of Footnote 6.]

and provide regular status updates to senior management.

Examiners should review the plan of a supervised firm to confirm that the firm is able to

identify and understand their LIBOR exposures. Examiners should discuss with a 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.