Federal Reserve Board Proposes Rules for LIBOR-related Contracts.

The Federal Reserve Board (the “Board”) recently issued a rule proposal related to LIBOR, a benchmark interest rate slated to be abandoned during 2023. Such action comes after Congress’s enactment of the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”).

For decades, the London Interbank Offered Rate or LIBOR, functioned as a widely-used reference rate governing trillions of dollars of financial instruments across numerous financial markets. Beginning about a decade ago, proposals emerged to replace LIBOR, after numerous reports surfaced of attempts to fix or manipulate the rate.

The LIBOR Act was designed to address existing financial contracts which do not contain fallback provisions addressing a discontinuance of the reference rate.

The proposal of the Board would specify a replacement rate for such financial contracts which were executed without such fallback language.

As required by the LIBOR Act, each proposed replacement rate is based on the Secured Overnight Financing Rate, which is often referred to as SOFR by financial market participants.

Do you have questions about the discontinuance of LIBOR and/or the adoption of SOFR? Do you need a borrowing instrument or credit agreement to move forward with a finance-related objective? If so, contact us to schedule an introductory consultation with Castle Garden Law.