Cuomo Signs ARRC-Backed Libor Transition Legislation

New York Gov. Andrew Cuomo yesterday signed a bill developed by the Alternative Reference Rates Committee that will facilitate the transition away from the London Interbank Offered Rate. The bill allows Libor-referencing financial instruments without reference rate fallback language to fall back automatically to the a reference rate recommended by the Federal Reserve or the ARRC—currently the Secured Overnight Financing Rate.

The new law helps avoid uncertainty about which rate will be used on the more than $200 trillion in outstanding contracts that reference U.S. dollar Libor—many of which are governed by New York state law. All settings of USD Libor will terminate by the middle of 2023. “By establishing a targeted solution for tough legacy contracts, this legislation will significantly reduce operational and legal risks for many market participants and help them seamlessly transition to the Secured Overnight Financing Rate,” said Tom Wipf, a vice chairman at Morgan Stanley and chairman of the ARRC, of which ABA is a member.