Structured Finance Association Supports Proposed Extension of USD LIBOR for Legacy Contracts

The Structured Finance Association (SFA) today released the following statement after the benchmark administrator for the London Inter-Bank Offered Rate (LIBOR) announced its intentions, subject to confirmation following an early December consultation, to cease the publication of the one week and two month U.S. Dollar (USD) LIBOR immediately following the December 31, 2021 publications, and the remaining USD LIBOR tenors immediately following the June 30, 2023 publications. Regulators in the United States and United Kingdom reacted positively today to the proposed path forward for the transition away from USD LIBOR, the benchmark index currently used to determine the interest rate that consumers pay on some credit cards, home equity lines of credit, reverse mortgages, and private student loans.

“We are encouraged to see strong support from policymakers and key organizations in the U.S. and abroad on a path forward, which brings much needed clarity on the LIBOR transition,” said Michael Bright, chief executive officer of SFA. “It is incredibly important to consumers, the securitization industry, and the broader floating rate market that we get this right, which is why market participants must march forward in the same direction and why we have been working with our members for years on a unified approach to develop solutions to ensure there is an orderly transition upon the discontinuance of LIBOR. This morning’s announcement, along with the legislative efforts in both New York state and the U.S. Congress that are still needed for the over $10 trillion of long-dated legacy contracts that mature after mid-2023, will provide the full complement of necessary solutions to work through this massive transition.”

The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation released a joint statement regarding the management of the LIBOR transition. The Federal Reserve welcomed the proposal in a statement from Vice Chair for Supervision Randal K. Quarles, as did the Alternative Reference Rates Committee, of which SFA is a member.  Learn more.