Libor Act leaves door open for synthetic rate in US contracts

Absence of proposed limit protects borrowers from sky-high prime rate but may irk some investors

Federal-reserve-logo-on-US-banknote

Some US law contracts are set to be swept into synthetic Libor following the US benchmark’s demise, after the Federal Reserve’s final rulemaking for legislation to tackle a tail of tough legacy contracts excluded a proposal that would have limited the synthetic fix to agreements struck under non-US laws.

The final rule for the Adjustable Interest Rate (Libor) Act, published on December 16, sought to clarify outstanding issues for a legal solution that provides safe harbour for US law contracts

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