FRB – FFIEC Issues Joint Statement on Managing the LIBOR Transition

July 24, 2020 – FFIEC issued joint member statement to highlight the financial, legal, operational, and consumer protection risks that will result from the expected discontinuation of LIBOR.

Statement encourages supervised institutions to continue preparation efforts to transition to alternative reference rates to mitigate these associated risks.

Statement Highlights
Importance of assessing LIBOR transition risks discussed, noting that institutions should quantify their LIBOR exposure, as almost every institution will be affected.

Risk management processes should align with the size and complexity of exposure.

The LIBOR transition is expected to be particularly significant for larger, more complex institutions holding a significant amount of LIBOR-denominated assets and liabilities.

Institutions should also address contracts with inadequate fallback language, evaluate third-party service providers that use LIBOR, and address or mitigate risks to consumers.

Supervisory focus increase on LIBOR discontinuation preparedness during 2020, 2021, particularly for those with significant exposure or less-developed transition processes.

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