Banking Agencies Urge Banks to Move on LIBOR Transition

In a joint statement, the Federal Reserve Board ("FRB"), the FDIC and the OCC (collectively, the "Agencies") encouraged banks to (i) begin transitioning loans away from LIBOR "without delay," (ii) prepare lending customers for the transition and (iii) ready internal systems to calculate new reference rates. The Agencies stated that they do not endorse a specific replacement rate for bank loans referencing LIBOR. They reiterated that "a bank may use any reference rate for its loans that the bank determines to be appropriate for its funding model and customer needs." The Agencies noted, however, that the Alternative Reference Rates Committee (or "ARRC"), which was convened by the FRB and the Federal Reserve Bank of New York, recommended the Secured Overnight Financing Rate (or "SOFR") as the preferred alternative for U.S. Dollar LIBOR.