BPI Comments on Federal Reserve’s Proposed Rulemaking to Implement LIBOR Act

Ladies and Gentlemen:

The Bank Policy Institute[1] appreciates the opportunity to comment on the Federal Reserve’s notice of proposed rulemaking to implement the Adjustable Interest Rate (LIBOR) Act (the “Act”).[2] We support the Federal Reserve’s proposal to adopt this regulation, which would implement the Act and carry out Congress’s goal of creating a uniform, nationwide approach for replacing USD LIBOR in so- called “tough legacy contracts.”[3] In this letter, we offer a number of recommendations intended to promote the objectives of the Act and the Federal Reserve’s proposal and to clarify certain ambiguities.

Part I of this letter explains why the Federal Reserve should eliminate the definitions of and framework contrasting “covered contracts” and “non-covered contracts.” Part II requests a clarification regarding the application of the Act and proposal to derivatives with reset dates on July 3 or July 4, 2023. Part III responds to the Federal Reserve’s request for feedback on the “potential ambiguity” identified in the proposal relating to LIBOR contracts with fallbacks that are triggered only when USD LIBOR is “unavailable.” Part IV addresses benchmark replacement conforming changes for consumer loans and other LIBOR contracts. Part V responds to certain of the specific questions the Federal Reserve presents in the proposal.

To read the full comment letter, click here, or click on the download button below.

[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

[2] Federal Reserve, Regulation Implementing the Adjustable Interest Rate (LIBOR) Act, 87 Fed. Reg. 45268 (July 28, 2022).

[3] “Tough legacy contracts” are contracts that reference USD LIBOR and will not mature by June 30, 2023, but which lack adequate fallback provisions providing for a clearly defined or practicable replacement benchmark following the cessation of USD LIBOR. See id. at 45269.