In a Barron’s op-ed today, Tom Wipf, chairman of the Alternative Reference Rates Committee, emphasized the need for legislation to address legacy contracts that have no effective means to replace Libor. Many existing contracts do not include provisions that deal with Libor’s end or have provisions “that would cause significant economic impacts that the parties may not have anticipated,” he said.
Wipf—who is also vice chairman of institutional securities at Morgan Stanley—highlighted that legislation to address legacy contracts “will significantly reduce operations and legal risks for many market participants and help them seamlessly transition to [Secured Overnight Financing Rate],” the ARRC’s preferred alternative to Libor.
New York and Alabama have passed legislative solutions based on the ARRC’s proposals, Wipf said adding that the ARRC will also advocate for passage of similar legislation in Congress and advocate for legislative solutions in other states as needed if federal legislation does not pass in time. The American Bankers Association continues to advocate for the Adjustable Interest Rate (Libor) Act, a bill that would address tough legacy contracts. The House advanced the bill by an overwhelming bipartisan vote in December.