Q: What indices are identified in the LIBOR Transition Rule as meeting Condition 2 of the Margin and Index Change Conditions for the LIBOR tenors?
A: The LIBOR Transition Rule provided examples of replacement indices that meet the Historical Fluctuation Comparison Condition, discussed above in LIBOR Credit Card FAQ 3, when replacing LIBOR indices for credit card products. The examples provided include certain SOFR-Based Spread-Adjusted Indices and Prime. They would replace each of the following tenors of LIBOR as follows:
1-month LIBOR: Prime and the SOFR-Based Spread-Adjusted Index to replace 1-month LIBOR are examples of replacements for 1-month LIBOR.
3-month LIBOR: Prime and the SOFR-Based Spread-Adjusted Index to replace 3-month LIBOR are examples of replacements for 3-month LIBOR.
6-month LIBOR: The SOFR-Based Spread-Adjusted Index to replace 6-month LIBOR is an example of a replacement for 6-month LIBOR.
As stated, these indices are examples that meet the Historical Fluctuation Comparison condition. If a creditor uses one of these indices as a replacement for LIBOR, the creditor must still ensure that the replacement index and margin meets the other conditions discussed in LIBOR Credit Card FAQ 3.
Additionally, these are examples, but other indices may also meet the Historical Fluctuation Comparison condition. See LIBOR Credit Card FAQs 3 through 9 for more information on factors for determining if an index is an appropriate replacement for LIBOR during the transition.