On March 9, the Federal Reserve Board issued supervisory letter SR 21-7 as a follow-up to a November 2020 interagency statement issued by the Fed, FDIC, and OCC that encouraged supervised institutions to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable, but by December 31, 2021 at the latest. (Covered by InfoBytes here.) However, the Fed’s SR 21-7 letter notes that the “extension of certain LIBOR tenors until June 30, 2023, will allow some existing LIBOR exposures to mature naturally.” SR 21-7 provides supervisory guidance for examiners to consider when assessing an institution’s plan to transition away from LIBOR, including the following six key aspects of a firm’s transition efforts: “(1) transition planning; (2) financial exposure measurement and risk assessment; (3) operational preparedness and controls; (4) legal contract preparedness; (5) communication; and (6) oversight.” SR 21-7 also includes specific guidance for assessing LIBOR transition efforts at institutions with less than $100 billion in total consolidated assets (which the Fed assumes “generally have less material and less complex LIBOR exposures”), as well as institutions with $100 billion or more in total consolidated assets.

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