LIBOR s Long Good-Bye | Allen Matkins jdsupra.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jdsupra.com Daily Mail and Mail on Sunday newspapers.
Wednesday, April 21, 2021
Ready or not, borrowers are involuntarily seeing changes in the interest rates they are being charged. Why, you ask? Because there are serious, systemic risks associated with the most widely used interest rate basis in the world – the London Interbank Offered Rate (or LIBOR), including the LIBOR Rate for U.S. Dollar denominated loans and other financial products (USD LIBOR). The situation is so serious that regulatory authorities have said that “given consumer protection, litigation, and reputation risks, [they] believe entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks . . .”. In our view, all of this means that borrowers should prepare themselves to deal with forthcoming interest rate changes in as effective a manner as possible (and not wait until the inevitable occurs later this year).
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This is an update on recent events in the cessation of the London Inter-bank Offered Rate (LIBOR):
InterContinental Benchmark Exchange (ICE), the organization that administers and announces LIBOR, and the United Kingdom’s Financial Conduct Authority (FCA), ICE’s regulator, announced on 5 March 2021:
LIBOR for most currencies and maturities will cease after 31 December 2021.
U.S. dollar LIBOR for overnight, one-month, three-month, six-month, and 12-month maturities will cease after 30 June 2023.
LIBOR is not expected to become unreliable prior to the cessation date applicable to the relevant currency and maturity.
The New York LIBOR Legislative Solution Becomes Law - Finance and Banking mondaq.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from mondaq.com Daily Mail and Mail on Sunday newspapers.
On April 7, 2021, the
proposed New York “legislative solution” for legacy USD LIBOR contracts became Article 18-C of the New York General Obligations Law. Article 18-C is primarily aimed at USD LIBOR contracts, securities or instruments (
e.g., floating rate notes (“FRNs”), loans, securitizations and mortgages) with the 2006 ISDA Definitions LIBOR fallbacks, or no fallback provisions at all, and which are governed by New York law. This article focuses on the law’s effect on USD LIBOR FRNs.
Article 18-C has no effect on USD LIBOR FRNs that have the Alternative Reference Rate Committee’s (“ARRC”) recommended fallback provisions to the secured overnight financing rate (“SOFR”), nor does it have any effect on non-USD LIBOR FRNs.