ABA, Trade Groups Urge Congress to Pass Libor Legislation

The American Bankers Association and a coalition of trade groups today urged congressional leaders to pass H.R. 4616, the Adjustable Interest Rate (Libor) Act. The legislation addresses “tough legacy” contracts that currently reference Libor, which will cease to be published by June 2023.

The legislation would provide a solution for the tough legacy contracts that lack sufficient fallback language and cannot be amended, the groups wrote. It also offers uniform treatment for all U.S. contracts that fall under federal legislation, creates a safe harbor from litigation “and prevents otherwise inevitable litigation costs and gridlock.”

The groups wrote that without federal legislation to address hard-to-modify financial contracts, securities, and loans that use Libor, there could be “years of uncertainty, litigation and a change in value,” which would create ambiguity and possibly lead to a reduction in liquidity and increased volatility.