The U.S. House Committee on Financial Services voted to advance H.R. 4616 (including a technical amendment), the “Adjustable Interest Rate (LIBOR) Act of 2021,” which would establish a process for replacing LIBOR with the Secured Overnight Financing Rate (“SOFR”) in financial contracts that do not contain sufficient fallback provisions upon the cessation of LIBOR. The Act would (i) direct the Federal Reserve Board (“FRB”) to issue rulemakings necessary to adjust SOFR for each category of LIBOR contract and (ii) preclude litigation related to existing contracts that lack a defined replacement benchmark rate.

The Act builds on similar laws enacted in New York and Alabama to provide uniform treatment of LIBOR contracts nationwide. As a Federal law, the Act would also amend a provision of the Trust Indenture Act of 1939 that could otherwise prohibit changes to certain securities and clarifies the tax treatment of contracts where LIBOR is replaced by SOFR. The Act does not, however, address contracts referencing 1-week and 2-month tenors of LIBOR, which are set to end by December 31, 2021.


This action by the House Financial Services Committee is an important step for smooth transition from LIBOR, but much remains to be done for contracts that cannot be remediated or refinanced. Notably, the Act requires rule-making to be complete within 180 days of enactment. After that, market participants will need time to operationalize the requirements of the rules by making the appropriate adjustments to their risk management systems, documentation and related internal policies. Time is running out.

Primary Sources

  1. Amendment to the Amendment in the Nature of a Substitute to H.R. 4616 Offered by Mr. Sherman of California
  2. U.S. House Financial Services Committee Event: Markup – H.R. 935; H.R. 2265; H.R. 3332; H.R. 3555; H.R. 4590; H.R. 4616; H.R. 4617; H.R. 4618; H.R. 4619; H.R. 4620 and H.R. 4685
  3. H.R. 4616, the “Adjustable Interest Rate (LIBOR) Act of 2021”
  4. U.S. House Financial Services Committee Memorandum: July 28, 2021, Full Committee Markup