In July 2017, the Financial Conduct Authority (FCA) announced that the availability and reliability of the London Interbank Offered Rate (LIBOR) beyond 2021 would not be guaranteed.1 Subsequently, on March 5, 2021, the FCA announced that the publication of certain less commonly used tenors of U.S. dollar (USD) denominated LIBOR will cease immediately following the LIBOR publication on Dec. 31, 2021, and all other USD LIBOR settings will cease immediately following the LIBOR publication on June 30, 2023.2
In November 2020, the federal banking regulators released a “Statement on LIBOR Transition,”3 explaining that the June 30, 2023, cessation date “would allow most legacy USD LIBOR contracts to mature before LIBOR experiences disruptions.” The statement goes on to say, “the agencies believe entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and will examine bank practices accordingly.”
With the Dec. 31, 2021, cessation date fast approaching and with the understanding that banking regulators are closely monitoring banks’ LIBOR transition activities, in July 2021 Crowe surveyed community banks to understand what products were most affected, what replacement rate(s) were being considered, and what transition activities institutions had completed.
A total of 75 institutions, each with total assets of less than $30 billion, responded to the survey. Exhibit 1 shows a summary of those institutions by asset size.