NCUA urges CUs to begin LIBOR transition
The NCUA yesterday issued a Letter to Credit Unions instructing credit unions to begin to transition away from using the London Inter-bank Offered Rate (LIBOR) and complete the process no later than Dec. 31, 2021.
In addition to the Letter to Credit Unions, the NCUA included a supervisory letter that provides the framework examiners will use to evaluate a credit union’s risk management processes and planning regarding the transition from LIBOR. The guidance applies to all federally-insured credit unions.
“Failure to prepare for LIBOR disruptions could undermine a federally insured credit union’s financial stability, and safety and soundness,” wrote NCUA Chairman Todd Harper in the letter. “As noted in the Federal Financial Institutions Examination Council’s (FFIEC) July 1, 2020, Joint Statement on Managing the LIBOR Transition, the LIBOR transition is a significant event that credit unions should manage carefully.”
LIBOR is set to stop publishing at the end of this year and the Secured Overnight Financing Rate (SOFR) has been identified as the alternative to LIBOR by the Alternative Reference Rate Committee. The Federal Reserve has consistently encouraged financial entities to prepare for the transition and cautioned stability risks that could arise from the transition. Several entities, including the Treasury Department, CFPB, federal financial regulators and the Federal Housing Finance Agency (FHFA), have released guidance and rules to assist in the transition.
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