Banks must accelerate the transition from the London interbank offered rate, or Libor, to the Secured Overnight Financing Rate, Federal Reserve Vice Chairman for Supervision Randal Quarles said
Speaking in Washington, Quarles noted that U.K. authorities have said they can only commit to publishing Libor—which has been marred by manipulation controversies—through the end of 2021.
Quarles was addressing a roundtable discussion of the Financial Stability Board, which he chairs. He noted that national working groups have performed due diligence on SOFR, the alternative reference rate designed to replace the Libor benchmark, upon which some $200 trillion in U.S. dollar-based derivatives and loans are based.
ICBA President and CEO Rebeca Romero Rainey represented community banks at the FSB meeting. ICBA serves on the Fed’s Alternative Reference Rates Committee
, which is implementing the transition.
In a comment letter
to the AARC last fall, ICBA expressed concern with community bank awareness of the transition and warned it could effectively convert some Libor-based loan agreements to fixed-rate contracts, resulting in unintended consequences to all parties.
The Federal Reserve Bank of New York last year released frequently asked questions
on the committee’s efforts to transition from Libor to SOFR.