On November 30, 2020, the ICE Benchmark Administration Limited (IBA), the administrator of the London Interbank Offered Rate (LIBOR), announced that it would consult on its plan to cease the publication of one-week and two-month USD LIBOR immediately after December 31, 2021 and to cease the publications of the remaining tenors of USD LIBOR (one, three, six, and 12-month) immediately after June 30, 2023. This follows a similar announcement from IBA earlier in the month regarding GBP, EUR, CHF and JPY LIBOR. IBA’s consultation for feedback will open in early December 2020 and is expected to close by the end of January 2021.

The Federal Reserve Board (the Federal Reserve) issued a statement applauding IBA’s decision to target a clear end date for USD LIBOR. The Federal Reserve noted that the cessation dates announced by IBA would allow time for “legacy contracts” to mature, creating a smooth transition from LIBOR to the new benchmark rate promoted by the Federal Reserve, the Secured Overnight Financing Rate (SOFR). The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) have jointly advised banks to stop entering into new LIBOR-based contracts as soon as practicable, but in any event by the end of 2021, noting that “failure to prepare for disruptions to USD LIBOR, including operating with insufficiently robust fallback language, could undermine financial stability and banks’ safety and soundness.”

These announcements are welcome news, indicating that the transition away from LIBOR is proceeding according to the schedule laid out by the Alternative Reference Rates Committee (ARRC) earlier this year, despite the stresses the COVID-19 pandemic has placed on the world economy. We expect final announcements regarding the dates for the cessation of all USD LIBOR tenors to come in early 2021, after the end of IBA’s consultation period.