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Quote for the Month

“I don’t know how some of the things in the past month would have been done but for community banks, …Community banks are the small engines that could and did and deliver big.”

Jelena McWilliams, Chair of the FDIC; speaking at the ICBA virtual meeting on May 5th, 2020

The Transition from LIBOR Index

The FCA announced in April 2019 that the interest rate benchmark LIBOR is expected to cease after the end-2021. Financial Institutions must transition to alternative rates before this date.

“The FDIC recognizes that the potential move away from or reduced use of LIBOR may result in some adjustments for financial institutions that have the rate embedded in contracts,” said Doreen R. Eberley, Director, FDIC Division of Risk Management Supervision.

The Consumer Financial Protection Bureau released several resources to facilitate the transition away from LIBOR for consumers and regulated entities.

One possible alternative that has come from the Federal Reserve Bank of New York is that it has issued an Operating Policy Statement regarding publication of Secured Overnight Financing Rate (SOFR) averages and a SOFR Index. Publication of 30-, 90-, and 180-day SOFR Averages as well as a SOFR Index will begin March 2, 2020, in order to support a successful transition away from U.S. dollar (USD) LIBOR. The new SOFR Averages will be referred to as “30-day Average SOFR”, “90-day Average SOFR” and “180-day Average SOFR.”

The statement revealed the calculation method to be used to determine the SOFR averages and index and illustrated how they will appear on a dedicated page on the NY Fed’s website when published.

As an institution, it is recommended that you begin to review if you use the LIBOR index and complete an analysis of what, if any, loans will need an amendment.
As of the date of this newsletter, the LIBOR index will be discontinued at the end of 2021.

Emerging Issues

SAVERS ACT / H.R. 6562

Key Provisions:

  • Securing Additional Value for Every Retirement Saver
  • Would temporarily raise contribution limits for defined contribution plans, including 401(k), 403(b) and 457 plans, as well as IRAs.
  • Would help those whose retirement savings have been harmed by the economic impact of the COVID-19 pandemic.

4/21/20 – Introduced in the House by Patrick T. McHenry

Emerging Issues Continued

HEROES Act / H.R. 6800

Key Provisions:

  • Health and Economic Recovery Omnibus Emergency Solutions Act
  • Would waive 2019 required minimum distributions (RMDs) from retirement accounts.
  • Would extend the deadline to roll over 2019 RMDs until 11/30/20.
  • Would extend the deadline to roll over 2020 RMDs (which were waived by Section 2203 of the CARES Act) until 11/30/20.

5/12/20 – Introduced in the House by Nita M. Lowey.
5/15/20 – Passed the House.