Alexandra Harris, 15 April 2021
President Joe Biden’s administration and the Federal Reserve are pushing for U.S. lawmakers to ease Wall Street’s transition away from the London interbank offered rate and help head off legal headaches for many contracts that risk being left in limbo under present plans.
In testimony set to be delivered at a House Financial Services subcommittee meeting Thursday, officials from both the Treasury Department and the Fed will voice support for federal legislation that would allow for an orderly way to shift existing financial products from the discredited set of reference rates, which currently underpins trillions of dollars in securities, derivatives and other contracts.
While banks and regulators have been busying themselves with arrangements for many major markets and products — and a newly passed law in New York state provides a further backstop for some agreements — a vast swath of contracts is still potentially vulnerable. That’s where Congress comes in.
“Federal legislation would establish a clear and uniform framework, on a nationwide basis, for replacing Libor in legacy contracts that do not provide for an appropriate fallback rate,” Mark Van Der Weide, general counsel for the Fed’s Board of Governors, said in written testimony released ahead of the hearing.
Link to Related Story: Libor Contracts Caught in Limbo Spur Calls for Congressional Fix