(May 28, 2021) An overview of the letter to credit unions on the future of the LIBOR reference rate is the latest summary to be posted by NASCUS; it is available to members only.
Last week, NCUA issued the letter (21-CU-03) essentially telling credit unions stop using LIBOR (the London Interbank Offered Rate) as soon as possible. Failure by credit unions to prepare for disruptions of LIBOR “could undermine a federally insured credit union’s financial stability, and safety and soundness,” the NCUA letter stated. “The LIBOR transition is a significant event that credit unions should manage carefully.”
The agency last week also issued on the same subject its first “Supervisory Letter” of the year, which NCUA said “provides the supervision framework examiners will use to evaluate a credit union’s risk management processes and planning regarding the transition from LIBOR.”
The supervisory letter outlines the background, potential LIBOR exposure for credit unions, and examination considerations – but offers no endorsement of a specific replacement for USD LIBOR.