CFPB Issues Interim Final Rule and Joint Statement Regarding LIBOR Transition
The CFPB recently issued an interim final rule with request for comments amending Regulation Z to facilitate the London Interbank Offered Rate (LIBOR) transition. The interim final rule is effective May 15, 2023, and comments must be received on or before 30 days after publication in the Federal Register.
In January 2023, the Board of Governors of the Federal Reserve System (Board) published a final rule implementing the LIBOR Act. WBK wrote about the Board’s final rule here. The CFPB’s interim final rule reflects the Board’s final rule and the LIBOR Act by, for example, making several terminology changes within Regulation Z and its commentary to align with the LIBOR Act and the Board’s implementing regulation.
The interim final rule also addresses the planned cessation of LIBOR through a series of other changes to Regulation Z and its commentary. For instance, in the 2021 LIBOR transition final rule published by the CFPB, the Bureau provided examples of certain indices that may meet the applicable Regulation Z standards for the 1-month, 3-month, and 6-month tenors of USD LIBOR. In that 2021 final rule, the CFPB reserved judgment as to whether to include references to a 1-year USD LIBOR index and its Secured Overnight Financing Rate (SOFR)-based replacement index. Through this interim final rule, the CFPB conforms Regulation Z to the LIBOR Act and the Board’s implementing regulation by adding references to the SOFR-based replacement for the 12-month tenor of LIBOR. WBK previously wrote about the CFPB’s 2021 final rule here.
Separately, the Board, the FDIC, the OCC, the National Credit Union Administration, and the CFPB recently issued a joint statement on completing the LIBOR transition. The joint statement reminds supervised entities that USD LIBOR panels will end as of June 30, 2023, and reiterates that the agencies expect institutions with USD LIBOR exposure to complete their transition of remaining LIBOR contracts “as soon as practicable.”