The Structured Finance Association (SFA) today released the following statement after New York Governor Andrew Cuomo signed Assembly Bill A164B into law. The highly-anticipated legislation will help facilitate the transition away from the London Inter-Bank Offered Rate (LIBOR) for certain legacy contracts and provide a legal safe harbor for rate replacement consistent with a legislative proposal from the Alternative Reference Rates Committee (ARRC).
“We are grateful for the leadership shown by the New York State Legislature in addressing the LIBOR transition head on and thank Governor Cuomo for signing this legislation into law,” said Michael Bright, CEO of the Structured Finance Association. “However, while this is an important step in the right direction, many contracts do not fall under New York law, which is why we maintain that federal legislation is necessary. Without action from Washington, some consumers, businesses, and bond investors will be unfairly left in limbo.”
Specifically, the proposed legislation would require the use of the benchmark replacement recommended by the Federal Reserve, the New York Fed, or the ARRC where the contract language is silent or the contract’s fallback provisions prescribe the use of LIBOR. Where the fallback provisions are discretionary, the proposed legislation’s safe harbor is intended to encourage the selection of the recommended benchmark replacement.
SFA was an early advocate in urging New York to consider the ARRC proposal and has also called for federal legislation to ease the transition away from LIBOR.