U.S. Dollar (USD) LIBOR Cessation and LIBOR-Linked Collateral Reporting Updates
In-scope financial institutions pledging floating rate loans with interest rates based on LIBOR are reminded to update their Automated Loan Deposit files to report the current terms of such loans as they are updated, either as a result of negotiations with customers, contractual fallback language, or under the regulatory fallback established by the Federal Reserve under provisions of the Adjustable Interest Rate (LIBOR) Act: Federal Reserve Board adopts final rule that implements Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR (Secured Overnight Financing Rate) that will replace LIBOR in certain financial contracts after June 30, 2023.
In doing so, if an in-scope financial institution pledges a loan that relies on the LIBOR Act to determine the interest rate of the loan, it would report such loan to have the Secured Overnight Financing Rate (SOFR) as the index underlying the current interest rate with any “spread adjustment” (as specified in the LIBOR Act to address certain differences between SOFR and LIBOR) included with the credit spread. For example, assuming the “spread adjustment” is 26 bps, a LIBOR + 100 loan would be reported as SOFR + 126.
Additional guidance on reportable indices can be found in the In-Scope File Format Specifications and Definitions document on the Pledging Collateral page of the Discount Window and Payment System Risk website. Any questions may be directed to your local Reserve Bank.