You may hear about changes to benchmark reference rates, such as the London Interbank Offered Rate (LIBOR), prior to December 2021. Reference rates are utilized broadly in the construction of many financial products, including loans, floating rate notes, derivatives and securitizations. As benchmark reform is implemented over the next couple of years, Bank of America is working with global regulators, industry working groups and trade associations on a transition strategy from current benchmarks to alternative reference rates.
In July 2017, the Financial Conduct Authority, a regulatory body in the United Kingdom, announced that it will no longer require banks to submit rates for the London Interbank Offered Rate (LIBOR) after 2021. This has created uncertainty about the future of LIBOR and certain other rates or indices which are used as interest rate “benchmarks” in many banking products and contracts.
Bank of America has established an enterprise-wide initiative to identify, assess and monitor risks associated with the potential discontinuation or unavailability of benchmarks, including LIBOR, and the transition to alternative reference rates. We are also evaluating existing contracts across all products to determine the impact of a discontinuation of LIBOR or other benchmarks and to address potential changes to those contracts.
Bank of America is actively working with global regulators, industry working groups and trade associations to develop strategies for an effective transition to new benchmarks. For example, Bank of America launched capabilities to support issuance and trading in products indexed to the new Secured Overnight Financing Rate (SOFR), which is the alternative benchmark rate to U.S. dollar LIBOR recommended by the Alternative Reference Rates Committee (ARRC). The ARRC is a group of private-market participants and official-sector entities convened by the Federal Reserve Board and the Federal Reserve Bank of New York. SOFR is a broad measure of the cost of borrowing U. S. dollars overnight collateralized by U.S. Treasury securities.
We will work closely with our clients on the transition, taking into consideration client concerns. Updates will be provided as relevant. For further guidance on how to prepare for the possibility that LIBOR or other benchmark rates will be discontinued or materially change, please consult with your legal, tax, financial and other professional advisors.
More information can be found in Bank of America’s most recent Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission. Below are additional resources on benchmark reform and the IBOR transition:
- U.S. Alternative Reference Rates Committee (ARRC)
- Bank of England
- European Central Bank (ECB)
- Federal Reserve Bank of New York (FRBNY)
- Financial Conduct Authority (FCA)
- Financial Stability Board (FSB)
- International Organization of Securities Commissions (IOSCO)
- International Swaps and Derivatives Association (ISDA)
- U.S. Commodity Futures and Trading Commission (CFTC)
- Prior to December 2021, benchmark reference rates –such as the London Interbank Offered Rate (LIBOR) –are expected to change
- Bank of America is working closely with global regulators and industry partners on a transition strategy
- We will also work with clients on the transition, taking into account client concerns
- More information can be found in Bank of America’s most recent Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission