Adjustable Interest Rate (LIBOR) Act of 2021
4/17/2024, 11:45 PMSummary of Bill HR 4616
Bill 117 HR 4616, also known as the Adjustable Interest Rate (LIBOR) Act of 2021, is a piece of legislation introduced in the US Congress. The purpose of this bill is to address the impending discontinuation of the London Interbank Offered Rate (LIBOR) as a benchmark interest rate.The bill aims to provide a framework for financial institutions to transition away from using LIBOR as a reference rate for adjustable-rate mortgages, student loans, and other financial products. It establishes a process for identifying alternative reference rates and ensures that consumers are protected during this transition period.
Additionally, the bill includes provisions to prevent disruptions in the financial markets and to promote transparency and fairness in the transition away from LIBOR. It also requires federal agencies to coordinate with each other and with state regulators to ensure a smooth transition for consumers and financial institutions. Overall, the Adjustable Interest Rate (LIBOR) Act of 2021 seeks to address the challenges posed by the discontinuation of LIBOR and to provide a clear and orderly transition to alternative reference rates. It aims to protect consumers and ensure the stability of the financial system during this period of change.
Congressional Summary of HR 4616
Adjustable Interest Rate (LIBOR) Act of 2021
This bill provides for the transition of certain financial contracts away from the London Interbank Offered Rate (LIBOR), a reference interest rate based upon the lending terms certain banks offer to each other for various lengths of time. LIBOR is set to be retired in 2023. Various financial contracts reference LIBOR as a benchmark for prevailing interest rates and use LIBOR in calculating certain payments or obligations.
In the event a contract referencing LIBOR does not have a fallback or replacement rate provision in effect when LIBOR is retired, or a replacement rate is not selected by a determining person as defined by the bill, the bill provides for a transition to a replacement rate selected by the Board of Governors of the Federal Reserve System. The bill also provides for conforming changes to these contracts, the continuity and enforceability of these contracts, and protections against liability as a result of such a transition.
