Transition Out of LIBOR—New ISDA Protocols and No-Fee Adherence Period

On October 26, 2020, GFOA distributed a Member Alert about the Federal Reserve Bank’s work to transition away from using LIBOR as a global benchmark interest rate in many financial transactions. For state and local governments, this could mean financial contracts including swaps, floating rate notes, bank loans, direct placements, and other financings and investments.

As was noted in the Alert, governments should review their outstanding financial contracts to see where they may have LIBOR exposure, and determine appropriate next steps. This is especially true regarding swap transactions. Swap transactions mostly adhere to the ISDA protocols ( which were updated last month to address the transition away from LIBOR. Therefore, existing swap contracts that governments have will need to be revised in order to reflect the new protocols, or governments should determine if other actions are needed.

ISDA is allowing an adherence period to adopt the new protocols for legacy contracts without fees for non-primary dealers through January 25, 2021. Governments should discuss with their internal and external financing teams (including swap advisors, municipal advisors, counsel, and counterparties) what adjustments may need to be made to existing contracts prior to January 25, 2021 to avoid the fee. Please be aware that the changes that need to be made to swap contracts may require governing board approval, and therefore should be reviewed and adjusted soon in order to take advantage of the fee-less adherence period.

GFOA participates on the Federal Reserve’s Alternative Reference Rates Committee (, the LIBOR transition working group. GFOA has also convened a municipal market working group whose mission is to educate governments and governmental entities about the discontinued use of LIBOR and the transition to other replacement rates, namely the Secured Overnight Financing Rate (SOFR). GFOA members should monitor updates and developments through the GFOA’s web site and GFOA’s weekly newsletter.