As we look toward Thanksgiving with thoughts on all of life’s blessings, community bankers recently got a bit of good news that we can all be thankful for. Following relentless ICBA outreach, the administrator of the Libor index announced it is waiving a $16,000 annual fee for more than 6,000 community banks. That is a savings to the community bank bottom line that can go directly toward supporting local economies.
Let me back up a little bit and tell you the whole story. Libor, the London Interbank Offered Rate, is a floating interest rate index set by participating banks in London. It is used for trillions of dollars of transactions ranging from adjustable-rate mortgages to student loans and interest-rate swaps. The Intercontinental Exchange, or ICE, which administers Libor, announced earlier this year that as of July 1 any financial institution using or referencing Libor in any financial products would be subject to the $16,000 annual fee.
ICBA repeatedly communicated its concerns to ICE and urged a complete exemption for all banks with less than $50 billion in assets. Again and again we cited the damaging impact that such high fees would have on community banks for even sporadically referencing the Libor index in their documents and transactions. For a community bank working day in and day out to help their local communities thrive, this $16,000 fee isn’t chump change.
Fortunately, persistence pays off. The new rate categories will exempt all banks under $1.5 billion in assets. Further, more than 300 banks under $10 billion in assets will pay $2,000 per year—$14,000 less than originally proposed. The total discounted fee schedule will save community banks under $10 billion potentially more than $100 million annually.
That’s a lot of turkey and mashed potatoes, and it certainly sounds like something to be thankful for. Have a Happy Thanksgiving, community bankers. Keep doing what you’re doing to help your neighborhoods thrive, and ICBA will keep on looking out for you in Washington, London and everywhere else. Because the opportunity to serve those who serve so many is definitely one of my greatest blessings.