Congress Passes ABA-Backed Bill Addressing Tough Legacy Libor Contracts

The Senate late Thursday night passed an omnibus spending package that included a bipartisan, American Bankers Association-backed bill to address “tough legacy” Libor contracts. With two tenors of U.S. dollar Libor no longer being published and the remainder set to cease by June 30, 2023, the legislative language would direct the Federal Reserve to determine replacement rates for Libor-referencing contracts that lack fallback language and to provide a safe harbor from litigation over a change in rates after the cessation of Libor.

In addition to the Libor “tough legacy” contract fix, the omnibus appropriations package includes several banking-related provisions, including an $11 billion increase to the authorization cap for the Small Business Administration’s 504 loan program—something ABA has previously called for—as well as $5 billion for debt refinancing.

Additionally, lawmakers authorized $295 million for community development financial institutions, including $35 million for the Treasury Department’s Bank Enterprise Award Program. ABA and a coalition of trade groups previously urged House and Senate appropriations leaders to continue bipartisan support of at least $360 million in funding for the CDFI Fund in fiscal year 2022, with $42 million allocated for the BEA program. The final bill reflects a total increase of $25 million for CDFIs, with about $10 million for the BEA program specifically. The bill now moves to President Biden for signature.