The Federal Reserve building in Washington (Photo: AP)
The Federal Reserve, Office of the Comptroller of the Currency and FDIC issued a joint statement Monday encouraging banks to transition away any financial contracts based on U.S. dollar-denominated Libor rates.
The Libor rate, short for the London Interbank Offered Rate, is the reference rate for many adjustable or floating rate loans in the corporate and municipal market. It is expected to expire at the end of 2021 and be replaced with another reference rate, which differs by region.
However, the Intercontinental Exchange, administrator of the Libor rate, announced Monday "to consult on its intention to cease publication" of only "one-week and two-month U.S. dollar-denominated Libor at the end of December."
It intends to continue to publish the remaining dollar-denominated Libor rates — for one-, three-, six- and 12- month and overnight — until the end of June 2023.
The extension into 2023 would "allow most legacy USD-denominated Libor contracts to mature before Libor experiences disruptions," according to the joint statement from the Fed, OCC, and FDIC.
