https://www.wsj.com/articles/regulators-ask-banks-about-preparations-for-libors-demise-11578063600
Risk & Compliance Journal
Regulators Ask Banks About Preparations for Libor's Demise
Banks must show how they are managing risks stemming from the planned end of the benchmark rate next year
The Federal Reserve is among the regulators that have asked banks about their plans for dealing with the end of Libor. Photo: leah millis/Reuters
Kristin Broughton
BiographyKristin Broughton
@kcbroughton
Kristin.Broughton@wsj.com
Jan. 3, 2020 10:00 am ET
Financial regulators are asking banks to show they have plans in place to manage the risks stemming from the planned demise of a key benchmark interest rate.
Regulators, which for months have urged banks and other financial services firms to prepare for the likely end of the London interbank offered rate in 2021, have recently begun asking for evidence of their preparations.
The New York State Department of Financial Services is requiring banks and insurers to submit plans for managing the risks associated with the end of Libor, the agency said in a letter last week. The Office of the Comptroller of the Currency, which oversees national banks, said in December that it plans to increase oversight of the issue and that examiners will evaluate whether banks have made an inventory of all contracts that could be affected.
The Federal Reserve's supervisors have also begun asking banks about their plans, Vice Chairman for Supervision Randal Quarles said in June. The Federal Deposit Insurance Corp. declined to comment.
"They are all making similar noises: 'We need you to pay attention. It is important. It isn't going to go away,' " said Paul Forrester, a partner at law firm Mayer Brown LLP who focuses on corporate finance and securities.
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Global banks face a particularly thorny challenge in moving away from Libor because they need to take into consideration the range of alternative rates that could be used in currencies across the world, Mr. Forrester said.
Major banks have made progress in preparing for the transition, according to Dan Stipano, former deputy chief counsel at the OCC. However, the coming transition to an alternative rate is rife with legal and operational risks for the industry, lawyers said.
"They need to give themselves a lot of lead time," said Mr. Stipano, who is now a partner at Buckley LLP.
Write to Kristin Broughton at Kristin.Broughton@wsj.com
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Banks must show regulators how they are managing risks stemming from the planned end next year of Libor, a benchmark interest rate
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