LIBOR: Unexpected News

In unexpected news today, the end of USD LIBOR has been extended to June 30, 2023.

The Federal Reserve Board put out a press release today supporting the extension of LIBOR through June 30, 2023.

ICE Benchmark Administration Limited (LIBOR’s administrator) has issued a proposal that includes ceasing the publication of the rarely used one week and two month LIBOR on December 31, 2021 while extending the remaining USD LIBOR settings through June 30, 2023.

“Today’s plan ensures that the transition away from LIBOR will be orderly and fair for everyone – market participants, business, and consumers,” said Randal K. Quarles, Vice Chair for Supervision and Chair of the Financial Stability Board.

The extended date is expected to promote “the safety and soundness of the financial system”.

The regulators both here and the in the UK, working with the administrator, are laying plans that would have banks stop writing new USD LIBOR contracts by the end of 2021, the original cessation date.

What does this mean for you?

It’s unlikely that you will be able to enter into new contracts past 2021, but your legacy contracts may continue through mid-2023. Note that these developments are subject to consultation outcomes and may change. It remains to be seen how the FASB will respond to these developments, but we are hopeful that topic 848 will be adjusted to conform.

If you need help analyzing the impacts of reference rate reform on your portfolio, contact us. And stay tuned to our blog for more updates and details.