{"id":1079,"date":"2020-06-01T12:50:04","date_gmt":"2020-06-01T18:50:04","guid":{"rendered":"https:\/\/avalaunchsites.com\/bma\/?p=1079"},"modified":"2020-10-02T13:01:08","modified_gmt":"2020-10-02T19:01:08","slug":"transition-from-libor-index","status":"publish","type":"post","link":"https:\/\/avalaunchsites.com\/bma\/2020\/06\/transition-from-libor-index\/","title":{"rendered":"Compliance Update \u2013 June 2020"},"content":{"rendered":"[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″ shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_link_target=”_self” column_shadow=”none” column_border_radius=”none” width=”1\/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” overlay_strength=”0.3″ column_border_width=”none” column_border_style=”solid” bg_image_animation=”none”][vc_row_inner column_margin=”default” text_align=”left”][vc_column_inner column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” width=”1\/1″ tablet_width_inherit=”default” overlay_strength=”0.3″ column_border_width=”none” column_border_style=”solid” bg_image_animation=”none”][nectar_gradient_text heading_tag=”h2″ color=”extra-color-gradient-2″ gradient_direction=”diagonal” text=”Quote for the Month”][vc_column_text]\u201cI don\u2019t know how some of the things in the past month would have been done but for community banks, \u2026Community banks are the small engines that could and did and deliver big.\u201d<\/em><\/p>\n

Jelena McWilliams, Chair of the FDIC; speaking at the ICBA virtual meeting on May 5th, 2020<\/em>[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][vc_row_inner column_margin=”default” text_align=”left”][vc_column_inner column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” width=”1\/1″ tablet_width_inherit=”default” overlay_strength=”0.3″ column_border_width=”none” column_border_style=”solid” bg_image_animation=”none”][nectar_gradient_text heading_tag=”h2″ color=”extra-color-gradient-2″ gradient_direction=”diagonal” text=”The Transition from LIBOR Index”][vc_column_text]The FCA announced in April 2019 that the interest rate benchmark LIBOR is expected to cease after the end-2021. Financial Institutions must transition to alternative rates before this date.<\/p>\n

“The FDIC recognizes that the potential move away from or reduced use of LIBOR may result in some adjustments for financial institutions that have the rate embedded in contracts,” said Doreen R. Eberley, Director, FDIC Division of Risk Management Supervision.<\/p>\n

The Consumer Financial Protection Bureau<\/a> released several resources to facilitate the transition away from LIBOR for consumers and regulated entities.<\/p>\n

One possible alternative that has come from the Federal Reserve Bank of New York<\/strong> is that it has issued an Operating Policy Statement<\/a> regarding publication of Secured Overnight Financing Rate (SOFR) averages and a SOFR Index. Publication of 30-, 90-, and 180-day SOFR Averages as well as a SOFR Index will begin March 2, 2020<\/strong>, in order to support a successful transition away from U.S. dollar (USD) LIBOR. The new SOFR Averages will be referred to as \u201c30-day Average SOFR\u201d, \u201c90-day Average SOFR\u201d and \u201c180-day Average SOFR.\u201d<\/p>\n

The statement revealed the calculation method to be used to determine the SOFR averages and index and illustrated how they will appear on a dedicated page on the NY Fed’s website when published.<\/p>\n

As an institution, it is recommended that you begin to review if you use the LIBOR index and complete an analysis of what, if any, loans will need an amendment.
\nAs of the date of this newsletter, the LIBOR index will be discontinued at the end of 2021.[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][vc_row_inner column_margin=”default” text_align=”left”][vc_column_inner column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” width=”1\/1″ tablet_width_inherit=”default” overlay_strength=”0.3″ column_border_width=”none” column_border_style=”solid” bg_image_animation=”none”][nectar_gradient_text heading_tag=”h2″ color=”extra-color-gradient-1″ gradient_direction=”diagonal” text=”Emerging Issues”][\/vc_column_inner][\/vc_row_inner][vc_row_inner column_margin=”default” text_align=”left”][vc_column_inner column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” width=”1\/1″ tablet_width_inherit=”default” overlay_strength=”0.3″ column_border_width=”none” column_border_style=”solid” bg_image_animation=”none”][nectar_gradient_text heading_tag=”h2″ color=”extra-color-gradient-2″ gradient_direction=”horizontal” text=”SAVERS ACT \/ H.R. 6562″][vc_column_text]Key Provisions:<\/strong><\/p>\n