President Joe Biden on Tuesday signed a $1.5 trillion omnibus funding bill that includes a replacement framework for outstanding financial contracts tied to LIBOR.
New contracts based on the London interbank offered rate ceased at the end of 2021, but the most-utilized U.S. dollar LIBOR tenors will stop in June 2023, giving more time for outstanding contracts to mature and reducing the chance of potential disruptions.
The wide-ranging 2,700-page spending bill included the Adjustable Interest Rate (LIBOR) Act of 2021, which allows LIBOR-based financial contracts with no stipulation for a new benchmark rate to default to the Federal Reserve's recommended SOFR, or secured overnight financing rate, without resorting to amendments or litigation. The House originally passed the LIBOR bill in December in a 415-9 vote and a similar bipartisan bill was introduced March 2 in the Senate.
The LIBOR bill will not affect LIBOR-based contracts that contain provisions that allow them to easily transition to an agreed-upon alternative interest rate.
It will protect an estimated $16 trillion of loans, securities and other financial instruments from chaos and costly litigation, said Rep. Brad Sherman, D-Calif., the LIBOR bill's sponsor, in a statement.
The House passed the omnibus spending bill in a 260-171 vote March 9 and the Senate did the same in a 68-31 vote March 10.
