WASHINGTON, Nov. 30 (Xinhua) -- U.S. regulatory agencies on Monday encouraged banks to transition away from the U.S. dollar London Interbank Offered Rate (USD LIBOR), a widely used benchmark rate, to alternative reference rates "as soon as practicable" and in any event by the end of 2021.

"Given consumer protection, litigation, and reputation risks, the agencies believe entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and will examine bank practices accordingly," the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency said in a joint statement.

"Therefore, the agencies encourage banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021," the statement said.

New contracts entered into before Dec. 31, 2021 should either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR's discontinuation, according to the U.S. regulators.

"These actions are necessary to facilitate an orderly- and safe and sound- LIBOR transition," the regulators said, adding the LIBOR transition is a significant event that poses complex challenges for banks and the financial system.

The move came after LIBOR's administrator, ICE Benchmark Administration Limited (IBA), on Monday released a proposal that would enable a clear end date for USD LIBOR and promote the safety and soundness of the financial system.

Under the proposal, the IBA will consult in early December on its intention to cease the publication of the one week and two month USD LIBOR settings at the end of 2021, and the publication of remaining USD LIBOR settings on June 30, 2023.

"Today's plan ensures that the transition away from LIBOR will be orderly and fair for everyone-market participants, businesses, and consumers," Fed Vice Chair for Supervision Randal Quarles said in a statement.

The LIBOR is a daily measure of the rate at which banks lend to each other, and the rate is reached by banks submitting transaction data to a central point.

The LIBOR has been under criticism since 2012, when it was discovered that the rate had been manipulated by some of the 20 bank panel participants.