Structured Finance Association Welcomes LIBOR Proposal in Governor Cuomo’s Budget Proposal

The Structured Finance Association (SFA) today released the following statement regarding inclusion of highly-anticipated legislation to facilitate the transition away from the London Inter-Bank Offered Rate (LIBOR) in New York Governor Andrew Cuomo’s fiscal year 2022 executive budget proposal. Consistent with SFA’s recommendation, the language facilitates a transition for certain legacy contracts and provides a legal safe harbor for rate replacement consistent with the Alternative Reference Rates Committee’s (ARRC) legislative proposal.

“LIBOR is the benchmark index currently used, for example, to determine the interest rate that consumers pay on some credit cards, home equity lines of credit, mortgages, and private student loans. With its far-reaching impact on the economy and on consumers, it’s critical we get this right,” said Michael Bright, CEO of the Structured Finance Association. “We welcome inclusion of this language, which provides clarity and promotes financial stability, and we are hopeful this proposal will become law once the legislature analyzes the governor’s budget.”

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. Between now and March 1, the legislature will analyze the governor’s proposal and reach agreement on a budget through a conference committee process between the Assembly and Senate. Any changes made to the governor’s proposed budget will be reflected in amended versions. The amended budget is then sent back to the governor who may use a line-item veto to disapprove items added by the legislature while approving the remainder of the bill.