BRIEFLY: Banking agencies urge stop to LIBOR use now
(Dec. 4, 2020) Banks, “as soon as practicable,” should cease entering into new contracts that employ LIBOR as a reference rate in loan contracts, the three federal banking agencies said this week. LIBOR (London Interbank Offer Rate), which is being phased out because the transactions it is based on don’t occur as often as they did in prior years, is used by many banks (and credit unions) as a benchmark for such products as adjustable mortgage loans. The agencies’ recommendation is being made, they said, in order to facilitate an orderly – and safe and sound – transition to alternative reference rates. Meanwhile, the administrator of the soon-to-be-defunct LIBOR (Intercontinental Exchange (ICE)) also this week proposed a plan to cease publishing the U.S. dollars version of the rate at the end of next year.