Thought Leadership

Federal Agencies Urge Banks to Transition from LIBOR

January 13, 2021 Advisory

The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (the federal agencies) are encouraging banks to transition away from U.S. dollar London Inter-bank Offered Rate (USD LIBOR) as soon as possible.

The Intercontinental Exchange (ICE), the organization that administers LIBOR, has announced that it intends to cease publication of one week and two month USD LIBOR settings after Dec. 31, 2021, and the remaining USD LIBOR settings after June 30, 2023. ICE previously only committed to publishing any USD LIBOR settings until the end of this year, and the sunset period is still subject to change. The planned cessation stems from concerns regulators and industry experts have about the robustness and sustainability of the process used to set LIBOR; the size of the market that uses LIBOR as a reference rate exceeds $200 trillion, while the size of the interbank lending market used to calculate LIBOR is typically only about $500 million per day.

In a joint statement issued on Nov. 30, 2020, the federal agencies warned that the failure to prepare for the transition away from LIBOR, either by using an alternative reference rate altogether, or by incorporating robust fallback language in any agreements with provisions referencing LIBOR, could undermine financial stability, safety and soundness, and pose significant risks related to consumer protection, litigation and the institution’s reputation.

Decision makers at affected companies should be sure to conduct risk assessments on LIBOR exposure across its lines of business. Further, transition plans should be put in place that are commensurate with the size and complexity of the institution’s LIBOR risk. Those with material LIBOR exposure should have a robust, well-developed transition plan, while smaller institutions or those that have limited exposure to LIBOR-referencing instruments may have less extensive, less formal plans. In any case, contracts and instruments executed between now and Dec. 31, 2021, should be made with the above directives in mind.

Our attorneys will continue to monitor for any further updates or developments on this issue. Please reach out to us with any questions or concerns you have about your LIBOR transition.

Contact Us
  • Worldwide
  • Boston, MA
  • Chicago, IL
  • Denver, CO
  • Dublin, Ireland
  • Edwardsville, IL
  • Jefferson City, MO
  • Kansas City, MO
  • Las Vegas, NV
  • London, England
  • Miami, FL
  • New York, NY
  • Orange County, CA
  • Philadelphia, PA
  • Princeton, NJ
  • Salt Lake City, UT
  • St. Louis, MO
  • Washington, D.C.
  • Wilmington, DE
Worldwide
abstract image of world map
Boston, MA
800 Boylston St.
30th Floor
Boston, MA 02199
Google Maps
Boston, Massachusetts
Chicago, IL
100 North Riverside Plaza
Suite 1500
Chicago, IL 60606-1520
Google Maps
Chicago, Illinois
Denver, CO
4643 S. Ulster St.
Suite 800
Denver, CO 80237
Google Maps
Denver, Colorado
Dublin, Ireland
Fitzwilliam Hall, Fitzwilliam Place
Dublin 2, Ireland
Google Maps
Edwardsville, IL
115 N. Second St.
Edwardsville, IL 62025
Google Maps
Edwardsville, Illinois
Jefferson City, MO
101 E. High St.
First Floor
Jefferson City, MO 65101
Google Maps
Jefferson City, Missouri
Kansas City, MO
2345 Grand Blvd.
Suite 1500
Kansas City, MO 64108
Google Maps
Kansas City, Missouri
Las Vegas, NV
7160 Rafael Rivera Way
Suite 320
Las Vegas, NV 89113
Google Maps
Las Vegas, Nevada
London, England
Royal College of Surgeons of England
38-43 Lincoln’s Inn Fields
London, WC2A 3PE
Google Maps
Miami, FL
355 Alhambra Circle
Suite 1200
Coral Gables, FL 33134
Google Maps
Photo of Miami, Florida
New York, NY
7 Times Square, 44th Floor
New York, NY 10036
Google Maps
New York City skyline
Orange County, CA
19800 MacArthur Boulevard
Suite 300
Irvine, CA 92612
Google Maps
Philadelphia, PA
2005 Market Street
29th Floor, One Commerce Square
Philadelphia, PA 19103
Google Maps
Philadelphia, Pennsylvania
Princeton, NJ
100 Overlook Center
Second Floor
Princeton, NJ 08540
Google Maps
Princeton, New Jersey
Salt Lake City, UT
222 South Main St.
Suite 1830
Salt Lake City, UT 84101
Google Maps
Salt Lake City, Utah
St. Louis, MO
7700 Forsyth Blvd.
Suite 1800
St. Louis, MO 63105
Google Maps
St. Louis, Missouri
Washington, D.C.
1717 Pennsylvania Avenue NW
Suite 400
Washington, DC 20006
Google Maps
Photo of Washington, D.C. with the Capitol in the foreground and Washington Monument in the background.
Wilmington, DE
1007 North Market Street
Wilmington, DE 19801
Google Maps
Wilmington, Delaware