The Governor’s LIBOR Legislation: Its Promise and Its Limitations

Bizar Male
Bank RatesAs widely reported, LIBOR—a benchmark interest rate used worldwide in trillions of dollars worth of investment contracts and other financial instruments—is being phased out and will cease publication in its current form entirely by mid-2023. With some LIBOR tenors terminating as soon as the end of this year, Governor Cuomo’s FY 2022 budget proposal includes provisions that address LIBOR’s retirement. See FY 2022 New York State Executive Budget, Transportation, Economic Development and Environmental Conservation Article VII Legislation, “Part PP: Discontinuance of LIBOR”, at pp. 233-42 (hereinafter Proposed LIBOR Legislation). Similar legislation has been drafted and is being considered by congressional lawmakers at the federal level.

Governor Cuomo’s proposed LIBOR legislation was initially drafted by the Alternative Reference Rates Committee (ARRC), a body convened by the Federal Reserve Board and the New York Fed to address the end of LIBOR. In proposing the legislation, ARRC warned that New York courts could soon face “a flood of litigation” arising from LIBOR’s discontinuation, given the significant number of LIBOR-based contracts and other financial instruments that are governed by New York law. Alternative Reference Rates Committee, “Proposed Legislative Solution to Minimize Legal Uncertainty and Adverse Economic Impact Associated with LIBOR Transition” (March 6, 2020), p. 7.

Accordingly, ARRC and other major stakeholders welcomed the Governor’s proposed legislation. See Keshia Clukey and William Shaw, “Libor Overhaul Gets Boost in Cuomo Bid to Avert Transition Chaos,” Bloomberg Law (Jan. 21, 2021). Tom Wipf, Vice Chairman of Institutional Securities at Morgan Stanley and Chairman of the ARRC, touted the legislation as “essential in order to provide legal certainty and minimize the adverse economic impacts for legacy Libor contracts,” calling the Governor’s decision to include the proposed legislation in his budget plan “notable progress.” Id.

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