5.19.21
On May 19, at a House Financial Services Committee hearing titled “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institution,” prudential regulators faced repeated questions about LIBOR transition and congressional efforts underway to repeal the OCC’s 2020 True Lender Rule. SFA’s government relations staff remains actively engaged with congressional staff on both issues.
LIBOR Transition
Rep. Brad Sherman (D-CA) thanked Fed Vice Chair Randal Quarles for mentioning LIBOR and working with him on his draft legislation to address legacy contracts. Rep. Bill Huizenga (R-MI) asked Vice Chair Quarles whether SOFR is the best alternative rate and stated that he’s “hearing from others that there are some different directions this should go.” Mr. Quarles noted the fundamental position of the Fed is that banks must be prepared to transition away from LIBOR, not that they should transition to a specific rate. Rep. French Hill (R-AR) questioned Mr. Quarles, stating that Brad Sherman’s (D-CA) draft legislation implies SOFR is the only rate that will provide legal certainty and asked, “if the Fed supports a variety of alternatives to replace LIBOR?” Quarles responded that “the Fed doesn’t support every alternative rate because the rate cannot be susceptible to manipulation, but the Fed does not support a single alternative.”
True Lender
Acting Comptroller of the Currency Michael Hsu faced several questions from members on the OCC’s reconsideration of the True Lender Rule. In one discussion, Rep. Greg Meeks (D-NY) pointed out that while the True Lender Rule was rushed and lacked adequate stakeholder input, the rule still attempted to address a legitimate public policy problem. Rep. Meeks asked, “if the House votes to overturn the rule and the President signs it, will the OCC have the legal authority to put forth a new rule that brings long called for legal supervisory certainty and enhanced consumer protections to the bank partnerships model?” Mr. Hsu responded that if the True Lender Rule is repealed, he cannot say exactly how the OCC would proceed, but that they are committed to their mission of helping the underbanked and providing fair treatment. Throughout the hearing Mr. Hsu repeated that once the Senate took up True Lender under the Congressional Review Act, the OCC paused its internal review and is closely monitoring House deliberations.