As you’ve read over the past few weeks, FHLBank changed its reporting of London Interbank Offered Rate (LIBOR)-indexed loans effective with the collateral reporting for the Sept. 30, 2021, Qualifying Collateral Determination (QCD) form. With this announcement, we are highlighting some anticipated future eligibility changes to LIBOR-indexed collateral for both LIBOR-indexed loan and securities collateral.
On March 5, 2021, the Financial Conduct Authority (FCA) announced the final cessation dates for LIBOR as of December 31, 2021, for the 1-week or 2-month US dollar LIBOR tenors and June 30, 2023, for the overnight and 12-month US dollar LIBOR tenors. In addition, FCA also highlighted that immediately after June 30, 2023, the 1-month, 3-month and 6-month US dollar LIBOR tenors will no longer be representative and FCA will not restore representativeness.
Given this announcement as well as guidance our members are receiving from their regulators, FHLBank anticipates using the following timeline for future changes to LIBOR-indexed collateral.
FHLBank defines preferred fallback language as:
- Language provided for in security offering documents or agreed to by the borrower which specifies how the replacement index will be determined in the event of the permanent cessation of LIBOR; or
- Language granting the member with unilateral rights to make changes to the index, including but not limited to substituting a replacement reference rate and setting the appropriate spread adjustment as necessary.
We anticipate seeking approval from the board of directors to implement these anticipated changes at our next board meeting scheduled for Dec. 15-17, 2021.
We value your membership and look forward to continuing to provide you access to an array of flexible funding options for mortgage lending, liquidity, asset/liability management and community investment.
If you have any questions about anticipated future eligibility changes for LIBOR-indexed collateral, please contact:
Lance Liby, First Vice President and Chief Credit Officer at 785.478.8104
Tom Bliss, Vice President and Director of Credit Administration at 785.478.8149
Financial Services Department at 877.933.7803
