[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4616 Reported in House (RH)]

<DOC>





                                                 Union Calendar No. 147
117th CONGRESS
  1st Session
                                H. R. 4616

                      [Report No. 117-206, Part I]

   To deem certain references to LIBOR as referring to a replacement 
 benchmark rate upon the occurrence of certain events affecting LIBOR, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 22, 2021

 Mr. Sherman introduced the following bill; which was referred to the 
 Committee on Financial Services, and in addition to the Committees on 
      Ways and Means, and Education and Labor, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

                            December 7, 2021

  Reported from the Committee on Financial Services with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                            December 7, 2021

   Committees on Ways and Means and Education and Labor discharged; 
committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed
 [For text of introduced bill, see copy of bill as introduced on July 
                               22, 2021]


_______________________________________________________________________

                                 A BILL


 
   To deem certain references to LIBOR as referring to a replacement 
 benchmark rate upon the occurrence of certain events affecting LIBOR, 
                        and for other purposes.


 


    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Adjustable Interest Rate (LIBOR) Act 
of 2021''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--
            (1) LIBOR is used as a benchmark rate in more than $200 
        trillion of contracts worldwide;
            (2) a significant number of existing contracts that 
        reference LIBOR do not provide for the use of a clearly defined 
        or practicable replacement benchmark rate when LIBOR is 
        discontinued; and
            (3) the cessation or non-representativeness of LIBOR could 
        result in disruptive litigation related to existing contracts 
        that do not provide for the use of a clearly defined or 
        practicable replacement benchmark rate.
    (b) Purpose.--It is the purpose of this Act--
            (1) to establish a clear and uniform process, on a 
        nationwide basis, for replacing LIBOR in existing contracts the 
        terms of which do not provide for the use of a clearly defined 
        or practicable replacement benchmark rate, without affecting 
        the ability of parties to use any appropriate benchmark rate in 
        new contracts;
            (2) to preclude litigation related to existing contracts 
        the terms of which do not provide for the use of a clearly 
        defined or practicable replacement benchmark rate; and
            (3) to allow existing contracts that reference LIBOR but 
        provide for the use of a clearly defined fallback and 
        practicable replacement rate, to operate according to their 
        terms.
    (c) Rule of Construction.--Nothing in this Act shall be construed 
to disfavor the use of any benchmark rate on a prospective basis.

SEC. 3. DEFINITIONS.

    As used in this Act, the following terms shall have the following 
meanings:
            (1) ``Benchmark'' shall mean an index of interest rates or 
        dividend rates that is used, in whole or in part, as the basis 
        of or as a reference for calculating or determining any 
        valuation, payment or other measurement.
            (2) ``Benchmark Administrator'' means a person that 
        publishes a Benchmark for use by third parties.
            (3) ``Benchmark Replacement'' shall mean a Benchmark, or an 
        interest rate or dividend rate (which may or may not be based 
        in whole or in part on a prior setting of LIBOR), to replace 
        LIBOR or any interest rate or dividend rate based on LIBOR, 
        whether on a temporary, permanent, or indefinite basis, under 
        or in respect of a LIBOR Contract.
            (4) ``Benchmark Replacement Conforming Changes'' shall mean 
        any technical, administrative, or operational changes, 
        alterations, or modifications that--
                    (A) the Board establishes for the purpose of 
                facilitating the implementation, administration, and 
                calculation of the Board-Selected Benchmark 
                Replacement; or
                    (B) in the reasonable judgment of a Calculating 
                Person, are otherwise necessary or appropriate to 
                permit the implementation, administration, and 
                calculation of the Board-Selected Benchmark Replacement 
                under or in respect of a LIBOR Contract after giving 
                due consideration to any Benchmark Replacement 
                Conforming Changes under subparagraph (A).
            (5) ``Board'' means the Board of Governors of the Federal 
        Reserve System.
            (6)(A) ``Board-Selected Benchmark Replacement'' shall mean 
        a Benchmark Replacement identified by the Board that is based 
        on SOFR.
            (B) The Board shall adjust the Board-Selected Benchmark 
        Replacement for each category of LIBOR Contract that the Board 
        may identify to--
                    (i) apply to each LIBOR tenor; and
                    (ii) incorporate the relevant Tenor Spread 
                Adjustment. (C) For Consumer Loans, the Board-Selected 
                Benchmark Replacement shall initially reflect the 
                spread between the Board-Selected Benchmark Replacement 
                and LIBOR immediately before the LIBOR Replacement Date 
                and shall incorporate the relevant Tenor Spread 
                Adjustment over a one-year transition period.
            (7) ``Calculating Person'' shall mean, with respect to any 
        LIBOR Contract, any person (which may be the Determining 
        Person) responsible for calculating or determining any 
        valuation, payment, or other measurement based on a Benchmark.
            (8) ``Consumer Loan'' shall mean a consumer credit 
        transaction. For purposes of this paragraph, the terms 
        ``consumer'' and ``credit'' have the meaning given those terms, 
        respectively, under section 103 of the Truth in Lending Act (15 
        U.S.C. 1602).
            (9) ``Determining Person'' shall mean, with respect to any 
        LIBOR Contract, any person with the authority, right, or 
        obligation, including on a temporary basis, (as identified by 
        the provisions of the LIBOR Contract, or as identified by the 
        governing law of the LIBOR Contract, as appropriate) to 
        determine a Benchmark Replacement.
            (10) ``Fallback Provisions'' shall mean terms in a LIBOR 
        Contract for determining a Benchmark Replacement, including any 
        terms relating to the date on which the Benchmark Replacement 
        becomes effective.
            (11) ``LIBOR'' shall mean the overnight and 1-, 3-, 6-, and 
        12-month tenors of U.S. dollar LIBOR (formerly known as the 
        London interbank offered rate) as administered by ICE Benchmark 
        Administration Limited (or any predecessor or successor 
        thereof). LIBOR shall not include the 1-week or 2-month tenors 
        of U.S. dollar LIBOR.
            (12) ``LIBOR Contract'' shall mean, without limitation, any 
        contract, agreement, indenture, organizational documents, 
        guarantee, mortgage, deed of trust, lease, Security (whether 
        representing debt or equity, and including any interest in a 
        corporation, a partnership, or a limited liability company), 
        instrument, or other obligation or asset that, by its terms, 
        continues in any way to use LIBOR as a Benchmark as of the 
        applicable LIBOR Replacement Date.
            (13) ``LIBOR Replacement Date'' shall mean the first London 
        banking day after June 30, 2023, unless the Board determines 
        that any LIBOR tenor will cease to be published or cease to be 
        representative on a different date.
            (14) ``Security'' shall have the meaning assigned to such 
        term in section 2(a) of the Securities Act of 1933 (15 U.S.C. 
        77b(a)).
            (15) ``SOFR'' shall mean the Secured Overnight Financing 
        Rate published by the Federal Reserve Bank of New York (or a 
        successor administrator).
            (16) ``Tenor Spread Adjustment'' shall mean--
                    (A) 0.00644 percent for overnight LIBOR;
                    (B) 0.11448 percent for 1-month LIBOR;
                    (C) 0.26161 percent for 3-month LIBOR;
                    (D) 0.42826 percent for 6-month LIBOR; and
                    (E) 0.71513 percent for 12-month LIBOR.

SEC. 4. LIBOR CONTRACTS.

    (a) On the LIBOR Replacement Date, the Board-Selected Benchmark 
Replacement shall, by operation of law, be the Benchmark Replacement 
for any LIBOR Contract that, after giving any effect to subsection 
(b)--
            (1) contains no Fallback Provisions; or
            (2) contains Fallback Provisions that identify neither--
                    (A) a specific Benchmark Replacement; nor
                    (B) a Determining Person.
    (b) On the LIBOR Replacement Date, any references in the Fallback 
Provisions of a LIBOR Contract to--
            (1) a Benchmark Replacement that is based in any way on any 
        LIBOR value, except to account for the difference between LIBOR 
        and the Benchmark Replacement, or
            (2) a requirement that a person (other than a Benchmark 
        Administrator) conduct a poll, survey, or inquiries for quotes 
        or information concerning interbank lending or deposit rates,
shall be disregarded as if not included in the Fallback Provisions of 
such LIBOR Contract and shall be deemed null and void and without any 
force or effect.
    (c) Subject to subsection (g)(2), a Determining Person shall have 
authority under this Act, but shall not be required, to select the 
Board-Selected Benchmark Replacement as the Benchmark Replacement.
    (d) Any selection by a Determining Person of the Board-Selected 
Benchmark Replacement pursuant to subsection (c) shall be--
            (1) irrevocable;
            (2) made by the earlier of the LIBOR Replacement Date and 
        the latest date for selecting a Benchmark Replacement according 
        to the terms of such LIBOR Contract; and
            (3) used in any determinations of the Benchmark under or in 
        respect of such LIBOR Contract occurring on and after the LIBOR 
        Replacement Date.
    (e) If a Determining Person has authority to select the Board-
Selected Benchmark Replacement under subsection (c) but does not select 
a Benchmark Replacement by the date specified in subsection (d)(2), 
then, on the LIBOR Replacement Date, the Board-Selected Benchmark 
Replacement shall, by operation of law, be the Benchmark Replacement 
for the LIBOR Contract.
    (f) If the Board-Selected Benchmark Replacement becomes the 
Benchmark Replacement for a LIBOR Contract pursuant to subsection (a), 
(c), or (e) then all Benchmark Replacement Conforming Changes shall 
become an integral part of such LIBOR Contract by operation of law. For 
the avoidance of doubt, a Calculating Person shall not be required to 
obtain consent from any other person prior to the adoption of Benchmark 
Replacement Conforming Changes.
    (g) The provisions of this Act shall not alter or impair--
            (1) any written agreement specifying that a LIBOR Contract 
        shall not be subject to this Act;
            (2) any LIBOR Contract that contains Fallback Provisions 
        that identify a Benchmark Replacement that is not based in any 
        way on any LIBOR value (including, but not limited to, the 
        prime rate or the Effective Federal Funds Rate), except that 
        such LIBOR Contract shall be subject to subsection (b);
            (3) any LIBOR Contract subject to subsection (c) as to 
        which a Determining Person does not elect to use a Board-
        Selected Benchmark Replacement pursuant to subsection (c), 
        except to the extent that such LIBOR Contract is subject to 
        subsection (b) or (e);
            (4) the application to a Board-Selected Benchmark 
        Replacement of any cap, floor, modifier, or spread adjustment 
        to which LIBOR had been subject pursuant to the terms of a 
        LIBOR Contract; or
            (5) any provisions of Federal consumer financial law that 
        requires creditors to notify borrowers regarding a change-in-
        terms.
    (h) Except as provided in section 5(c), the provisions of this Act 
shall not alter or impair the rights or obligations of any person, or 
the authorities of any agency, under Federal consumer financial law (as 
defined in section 1002(14) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (12 U.S.C. 5481(14)).

SEC. 5. CONTINUITY OF CONTRACT AND SAFE HARBOR.

    (a) A Board-Selected Benchmark Replacement and the selection or use 
of a Board-Selected Benchmark Replacement as a Benchmark Replacement 
under or in respect of a LIBOR Contract, as well as any Benchmark 
Replacement Conforming Changes, by operation of section 4 shall 
constitute--
            (1) a commercially reasonable replacement for and a 
        commercially substantial equivalent to LIBOR;
            (2) a reasonable, comparable, or analogous rate, index, or 
        term for LIBOR;
            (3) a replacement that is based on a methodology or 
        information that is similar or comparable to LIBOR;
            (4) substantial performance by any person of any right or 
        obligation relating to or based on LIBOR; and
            (5) a replacement that has historical fluctuations that are 
        substantially similar to those of LIBOR for purposes of the 
        Truth in Lending Act and its implementing regulations.
    (b) Neither of (1) the selection or use of a Board-Selected 
Benchmark Replacement as a Benchmark Replacement or (2) the 
determination, implementation, or performance of Benchmark Replacement 
Conforming Changes, in each case by operation of section 4, shall (A) 
be deemed to impair or affect the right of any person to receive a 
payment, or to affect the amount or timing of such payment, under any 
LIBOR Contract or (B) have the effect of (i) discharging or excusing 
performance under any LIBOR Contract for any reason, claim, or defense 
(including, but not limited to, any force majeure or other provision in 
any LIBOR Contract), (ii) giving any person the right to unilaterally 
terminate or suspend performance under any LIBOR Contract, (iii) 
constituting a breach of any LIBOR Contract, or (iv) voiding or 
nullifying any LIBOR Contract.
    (c) No person shall be subject to any claim or cause of action in 
law or equity or request for equitable relief, or have liability for 
damages, arising solely out of the selection or use of a Board-Selected 
Benchmark Replacement or the determination, implementation, or 
performance of Benchmark Replacement Conforming Changes, in each case 
by operation of section 4; provided, however, that any person 
(including a Calculating Person) shall remain subject to any existing 
legal, regulatory, or contractual obligations to correct servicing or 
other ministerial errors under or in respect of a LIBOR Contract.
    (d) The selection or use of a Board-Selected Benchmark Replacement 
or the determination, implementation, or performance of Benchmark 
Replacement Conforming Changes, in each case by operation of section 4, 
shall not be deemed to--
            (1) be an amendment or modification of any LIBOR Contract; 
        or
            (2) prejudice, impair, or affect any person's rights, 
        interests, or obligations under or in respect of any LIBOR 
        Contract.
    (e) Except as provided in either subsections (a), (b), or (c) of 
section 4, the provisions of this Act shall not be interpreted as 
creating any negative inference or negative presumption regarding the 
validity or enforceability of--
            (1) any Benchmark Replacement (including any method for 
        calculating, determining, or implementing an adjustment to the 
        Benchmark Replacement to account for any historical differences 
        between LIBOR and the Benchmark Replacement) that is not a 
        Board-Selected Benchmark Replacement; or
            (2) any changes, alterations, or modifications to or in 
        respect of a LIBOR Contract that are not Benchmark Replacement 
        Conforming Changes.

SEC. 6. PREEMPTION.

    (a) This Act and the regulations hereunder shall supersede any and 
all laws, statutes, rules, regulations, or standards of any State, the 
District of Columbia, or any territory or possession of the United 
States, insofar as they provide for the selection or use of a Benchmark 
Replacement or related conforming changes.
    (b) No provision of State or local law that expressly limits the 
manner of calculating interest, including the compounding of interest, 
shall apply to the selection or use of a Board-Selected Benchmark 
Replacement or Benchmark Replacement Conforming Changes.

SEC. 7. TRUST INDENTURE ACT OF 1939.

    Section 316 of the Trust Indenture Act of 1939 (15 U.S.C. 77ppp) is 
amended--
            (1) by striking ``and'' after ``of subsection (a),'' in 
        subsection (b); and
            (2) by inserting ``, and except that the right of any 
        holder of any indenture security to receive payment of the 
        principal of and interest on such indenture security shall not 
        be deemed to be impaired or affected by any change occurring by 
        the application of section 4 of the Adjustable Interest Rate 
        (LIBOR) Act of 2021 to any indenture security'' after ``subject 
        to such lien'' in subsection (b).

SEC. 8. RULEMAKING.

    Not later than 180 days after the date of enactment of this Act, 
the Board shall issue such regulations as may be necessary or 
appropriate to enable it to administer and carry out the purposes of 
this Act.

SEC. 9. INTERBANK OFFERED RATE TRANSITION RULE OF CONSTRUCTION.

    None of--
            (1) the selection or use of a Board-Selected Benchmark 
        Replacement as a Benchmark Replacement,
            (2) the determination, implementation, or performance of 
        Benchmark Replacement Conforming Changes; or
            (3) the application to any LIBOR Contract of, or the 
        agreement by parties thereto to terms consistent with, section 
        4,
shall be treated as a transfer, disposition, or conversion of property.
                                                 Union Calendar No. 147

117th CONGRESS

  1st Session

                               H. R. 4616

                      [Report No. 117-206, Part I]

_______________________________________________________________________

                                 A BILL

   To deem certain references to LIBOR as referring to a replacement 
 benchmark rate upon the occurrence of certain events affecting LIBOR, 
                        and for other purposes.

_______________________________________________________________________

                            December 7, 2021

  Reported from the Committee on Financial Services with an amendment

                            December 7, 2021

   Committees on Ways and Means and Education and Labor discharged; 
committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed