The President has signed into law legislation based on a House-passed bill to prevent the chaos feared when the use of the LIBOR benchmark ceases for legacy contracts that lack language authorizing reliance on an alternative, “fallback” rate. The measure in no way obviates the obligation U.S. financial institutions have to various regulators to abandon LIBOR where fallback language exists or in new contracts. Instead, the measure clarifies legal risk in eligible legacy contracts to prevent disruptive disputes that could expose financial institutions and even the system as a whole to significant operational or even credit risk.
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