The Federal Reserve Board adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act. The U.K. Financial Conduct Authority announced it would phase out LIBOR with a sunset in 2023 and the U.S. dollar LIBOR panels will end after June 30, 2023. As part of the final rule, benchmark rates based on SOFR (Secured Overnight Financing Rate) will replace LIBOR in certain financial contracts after June 30, 2023.
The final rule:
- Classifies SOFR-based Board-selected replacements for LIBOR contracts that will not mature before the LIBOR replacement date and do not contain practicable benchmark replacements.
- Identifies different SOFR-based Board-selected benchmark replacements for categories of LIBOR contracts.
- Identifies benchmark replacement conforming changes related to the implementation and calculation of the Board-selected benchmark replacement.
- Specifies that a determining person may select the Board-selected benchmark replacement for the relevant type of LIBOR contract.
- Expressly states that the LIBOR Act’s protections related to the selection or use of the Board-selected benchmark replacement shall apply to any LIBOR contract for which the Board-selected benchmark replacement becomes the benchmark replacement.
- Declares under the LIBOR Act that the final rule preempts any state or local law or standard relating to the selection or use of a benchmark replacement or conforming changes.*
The effective date of the final rule is 30 days after publication in the Federal Register.
To view the full details of the final rule, please visit the links below.