Letter to the Fed on the Regulation Implementing the Adjustable Interest Rate

Ms. Ann E. Misback
Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

The American Bankers Association (ABA) is pleased to submit our comments to the Board of Governors of the Federal Reserve System (Board) to its proposed rule that would implement the Adjustable Interest Rate (LIBOR) Act (Act). The proposed rule would establish benchmark replacements for contracts governed by U.S. law that reference certain tenors of U.S. Dollar LIBOR and that do not have terms that provide for the use of a clearly defined and practicable replacement benchmark rate following the first London banking day after June 30, 2023. The proposed rule also would provide additional definitions and clarifications consistent with the Act.

ABA appreciates the Board's efforts to complete implementation of the Act so that banks and other market participants can continue moving forward expeditiously to complete the transition from LIBOR and, in particular, to realize the benefits of the Act's provisions to address "tough legacy" contracts. To further that goal, ABA recommends that the Board address three additional points, described below.

First, we recommend that the Board specifically include in the final regulation the text of §104(f)(6) specifying that the Act does not alter or impair the rights or obligations of any person, or the authorities of any agency, under Federal consumer financial law. In addition, we recommend that in the Supplementary Information to the final regulation it offer as an illustration of its application the Consumer Financial Protection Bureau's (Bureau) Regulation Z amendments. Second, we believe that it would be useful if the Board can address the ambiguity of LIBOR being "nonrepresentative," even if a "synthetic" LIBOR continues to be published. Third, in light of the Board's determination to identify no benchmark replacement conforming changes, we believe the Board should clarify that such changes made as permitted under the terms of existing LIBOR contracts would not conflict with the application of the Act to the determining person's determination and implementation of the Board-selected benchmark replacement for such contracts, including availability of the Act's safe harbor.

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