Nov. 14, 2018
As ICBA expressed concern with community bank awareness of the transition from U.S. dollar LIBOR to an alternative reference rate, the initiative received a shot in the arm from the Federal Home Loan Banks.
In a comment letter to the Fed’s Alternative Reference Rates Committee, which is implementing the transition and on which ICBA serves, ICBA said there are community banks that may be unaware of the transition and issuing or purchasing LIBOR-based floating-rate notes. While ICBA and the committee are working to educate community banks on the switch to the Secured Overnight Financing Rate, ICBA said permanently replacing LIBOR in 2021 could have unintended consequences for those banks.
Meanwhile, the FHLBanks issued $4 billion in debt tied to the new SOFR rate to bolster the transition. Federal Reserve Vice Chairman for Supervision Randal Quarles, who has expressed support for the alternative rate, applauded the FHLBanks for the issuance.
The Federal Reserve Bank of New York recently released frequently asked questions on the committee’s efforts to transition from LIBOR to SOFR.