ARRC Welcomes Passage of Federal LIBOR Transition Legislation in Omnibus Spending Package

  • Source: newyorkfed.org

Treliant Takeaway:

Treliant helps global banking institutions manage the transition away from LIBOR settings, which ended for Sterling, Swiss franc, Japanese yen, and euro on December 31, 2021. With the federal bill passing yesterday (March 15), there is now a solution for all U.S. law legacy contracts that have no workable fallbacks at the cessation of LIBOR. Our consultant team has deep experience helping our global banking clients prepare for and manage the complexity of regulatory change.

Highlights:

The new legislation provides a targeted solution for financial contracts that mature after the cessation of LIBOR in mid-2023 and have no effective means to replace LIBOR upon its cessation. It also provides a safe harbor to lenders if they choose SOFR in contracts where a party has the discretion to select a successor rate.

  • The legislation will minimize legal and operational risks and adverse economic impacts associated with the transition—providing greater certainty to a diverse array of corporate borrowers and lenders, as well as to retail bondholders and consumers whose student loans, mortgages, and investment accounts it will protect from disruption.
  • This new federal LIBOR law takes an approach similar to the legislation that was initially proposed by the ARRC in 2020 and has since been passed by New York and several other states
  • The federal legislation applies to all U.S. law contracts and will make further state-by-state action unnecessary.

In a statement issued by the Alternative Reference Rates Committee (ARRC), Tom Wipf, ARRC Chairman and Vice Chairman of Institutional Securities at Morgan Stanley, said, “the passage of this legislation builds on the considerable momentum we’ve seen so far in 2022, as financial markets continue to transition to SOFR. We urge all market participants to remain focused on this vital work in this final stage of the transition.”

Author

Megan Beukelman

Megan Beukelman, a Principal Consultant in Treliant’s Capital Markets practice area, is a management consulting professional with global experience leading transformation, regulatory reform, cost-out and operating model redesign programs. At Treliant, Megan has partnered with a Global Tier 1 Investment Bank to transform their Global Markets business, leading multiple regulatory…