With the London Interbank Offered Rate relied on by many banks not guaranteed to be available after 2021, the American Bankers Association and the Consumer Bankers Association today welcomed the Consumer Financial Protection Bureau’s proposed changes to Regulation Z designed to facilitate the transition away from Libor. In June, the bureau proposed changes to open-end and closed-end provisions to provide examples of replacement indexes for Libor indexes that meet Reg Z standards.
“The proposed roadmap to choose a compliant replacement index will be useful for compliance with Regulation Z and is also likely to be used by courts and others in interpreting contracts that, for compliance and other reasons, mirror regulatory text,” ABA and CBA said. “We strongly urge the bureau to finalize amendments quickly so that there is sufficient opportunity for banks and other creditors to prepare for and proceed with the transition from Libor beginning on the March 15, 2021, date proposed by the bureau.”
ABA and CBA recommended a few changes, including clarifying that replacement indexes identified in the regulation are illustrative only and providing criteria for identifying other acceptable Libor replacements and comparing available indexes. The groups asked the CFPB to specifically identify WSJ Prime as a comparable index for variable-rate closed-end loans and to consider identifying other appropriate replacements, including Ameribor and Constant Maturity Treasury. They also requested guidance on the meaning of an index becoming “unavailable.”