Q: Would it be appropriate for Board-supervised institutions to enter into any new LIBOR contracts after December 31, 2021?
A: As stated in SR Letter 20-27 and SR Letter 21-17, there may be limited circumstances in which it would be appropriate for an institution to enter into new USD LIBOR contracts after December 31, 2021, such as
(i) transactions executed for purposes of required participation in a central counterparty auction procedure in the case of a member default, including transactions to hedge the resulting USD LIBOR exposure;
(ii) market making in support of client activity related to USD LIBOR transactions executed before January 1, 2022;
(iii) transactions that reduce or hedge the institution's or any client of the institution's USD LIBOR exposure on contracts entered into before January 1, 2022; and
(iv) novations of USD LIBOR transactions executed before January 1, 2022.
A Board-supervised institution should have reasonable measures in place to assess whether a new USD LIBOR contract would be consistent with safety and soundness practices. These measures should align with the institution's existing risk management processes.