Tester: Libor Fix Legislation is in Must-Pass Spending Bill

A bipartisan bill, championed by the ABA, to fix ‘legacy-hard’ Libor contracts is included in the omnibus spending bill Congress is expected to pass in the coming days, said today. Sen. Jon Tester (D-Mont.) at the ABA summit in Washington. . “We got it put in the omnibus bill, which means by the end of this week, by tomorrow, it should be passed,” Tester said.

With two US dollar Libor tenors no longer being published and the remainder set to cease by June 30, 2023, the legislative language would direct the Federal Reserve to determine replacement rates for contracts referencing Libor that lack fallback language and to provide a safe harbor from litigation over a rate change after the Libor halt. A companion bill in the House, HR 4616, passed by an overwhelming bipartisan vote of 415 to 9 in December.

Meanwhile, Tester said he was continuing to push S. 3409, which would direct federal banking agencies to set community banks’ leverage ratio at between 8% and 8.5%, down from 9%, until the end of 2024. “It’s a problem, an unintended consequence” of bank balance sheets that swelled after the pandemic crisis and the paycheck protection program, Tester said. community banks have done and we need to make sure it doesn’t affect you in other ways.”