,,ii #aagth ,,congress #b;d ,session ,s4 #cggi ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #h 7legislative day1 ,march #g71 #bjbb,mr4 ,tester 7for himself1 ,mr4 ,tillis1 ,mr4 ,brown1 ,mr4 ,toomey1 ,mr4 ,rounds1 ,mr4 ,reed1 ,mr4 ,hagerty1 and ,mr4 ,warner7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to establish a clear and uniform process1 on a nationwide basis1 for replacing the ,london interbank offered rate in existing contracts1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,adjustable ,interest ,rate 7,,libor7 ,act4 #b4 ,findings and purpose 7a7 ,findings ,congress finds that-- 7#a7 ,,libor is used as a benchmark rate in more than #bjj1jjj1jjj1jjj1jjj worth of contracts worldwide2 7#b7 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 discontinued2 and 7#c7 the cessation or nonrepresentativeness 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 rate4 7b7 ,purpose ,it is the purpose of this ,act-- 7#a7 to establish a clear and uniform process1 on a nationwide basis1 for replacing ,,libor in existing contracts the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate1 without affecting the ability of parties to use any appropriate benchmark rate in new contracts2 7#b7 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 rate2 7#c7 to allow existing contracts that reference ,,libor but provide for the use of a clearly defined and practicable replacement rate1 to operate according to their terms2 and 7#d7 to address ,,libor references in ,federal law4 #c4 ,definitions ,in this ,act3 7#a7 ,benchmark ,the term benchmark means an index of interest rates or dividend rates that is used1 in whole or in part1 as the basis of or as a reference for calculating or determining any valuation1 payment1 or other measurement4 7#b7 ,benchmark administrator ,the term benchmark administrator means a person that publishes a benchmark for use by third parties4 7#c7 ,benchmark replacement ,the term benchmark replacement means a benchmark1 or an interest rate or dividend rate 7which may or may not be based in whole or in part on a prior setting of ,,libor71 to replace ,,libor or any interest rate or dividend rate based on ,,libor1 whether on a temporary1 permanent1 or indefinite basis1 under or with respect to a ,,libor contract4 7#d7 ,benchmark replacement conforming changes ,the term benchmark replacement conforming changes means any technical1 administrative1 or operational changes1 alterations1 or modifications that-- 7,a7 the ,board determines1 in its discretion1 would address #a or more issues affecting the implementation1 administration1 and calculation of the ,board-selected benchmark replacement in ,,libor contracts2 or 7,b7 solely with respect to a ,,libor contract that is not a consumer loan1 in the reasonable judgment of a calculating person1 are otherwise necessary or appropriate to permit the implementation1 administration1 and calculation of the ,board-selected benchmark replacement under or with respect to a ,,libor contract after giving due consideration to any benchmark replacement conforming changes under subparagraph 7,a74 7#e7 ,board ,the term ,board means the ,board of ,governors of the ,federal ,reserve ,system4 7#f7 ,board-selected benchmark replacement ,the term ,board-selected benchmark replacement means a benchmark replacement identified by the ,board that is based on ,,sofr1 including any tenor spread adjustment pursuant to section #d7;e74 7#g7 ,calculating person ,the term calculating person means1 with respect to any ,,libor contract1 any person1 including the determining person1 responsible for calculating or determining any valuation1 payment1 or other measurement based on a benchmark4 7#h7 ,consumer2 credit ,the terms consumer and credit have the meanings given the terms in section #ajc of the ,truth in ,lending ,act 7#ae ,u4,s4,c4 #afjb74 7#i7 ,consumer loan ,the term consumer loan means a consumer credit transaction4 7#aj7 ,determining person ,the term determining person means1 with respect to any ,,libor contract1 any person with the authority1 right1 or obligation1 including on a temporary basis 7as identified by the ,,libor contract or by the governing law of the ,,libor contract1 as appropriate7 to determine a benchmark replacement4 7#aa7 ,fallback provisions ,the term fallback provisions means terms in a ,,libor contract for determining a benchmark replacement1 including any terms relating to the date on which the benchmark replacement becomes effective4 7#ab7 ,,ibor ,the term ,,ibor means ,,libor1 any tenor of non-,u4,s4 dollar currency rates formerly known as the ,london interbank offered rate as administered by ,,ice ,benchmark ,administration ,limited 7or any predecessor or successor administrator thereof71 and any other interbank offered rates that are expected to cease4 7#ac7 ,,ibor benchmark replacement ,the term ,,ibor benchmark replacement means a benchmark1 or an interest rate or dividend rate 7which may or may not be based in whole or in part on a prior setting of an ,,ibor71 to replace an ,,ibor or any interest rate or dividend rate based on an ,,ibor1 whether on a temporary1 permanent1 or indefinite basis1 under or with respect to an ,,ibor contract4 7#ad7 ,,ibor contract ,the term ,,ibor contract means any contract1 agreement1 indenture1 organizational document1 guarantee1 mortgage1 deed of trust1 lease1 security 7whether representing debt or equity1 including any interest in a corporation1 a partnership1 or a limited liability company71 instrument1 or other obligation or asset that1 by its terms1 continues in any way to use an ,,ibor as a benchmark4 7#ae7 ,,libor ,the term ,,libor-- 7,a7 means the overnight and #a-1 #c-1 #f-1 and #ab-month tenors of ,u4,s4 dollar ,,libor 7formerly known as the ,london interbank offered rate7 as administered by ,,ice ,benchmark ,administration ,limited 7or any predecessor or successor administrator thereof72 and 7,b7 does not include the #a-week or #b-month tenors of ,u4,s4 dollar ,,libor4 7#af7 ,,libor contract ,the term ,,libor contract means any contract1 agreement1 indenture1 organizational document1 guarantee1 mortgage1 deed of trust1 lease1 security 7whether representing debt or equity1 including any interest in a corporation1 a partnership1 or a limited liability company71 instrument1 or other obligation or asset that1 by its terms1 uses ,,libor as a benchmark4 7#ag7 ,,libor ,replacement ,date ,the term ,,libor replacement date means the first ,london banking day after ,june #cj1 #bjbc1 unless the ,board determines that any ,,libor tenor will cease to be published or cease to be representative on a different date4 7#ah7 ,security ,the term security has the meaning given the term in section #b7;a7 of the ,securities ,act of #aicc 7#ae ,u4,s4,c4 #gg;b7a774 7#ai7 ,,sofr ,the term ,,sofr means the ,secured ,overnight ,financing ,rate published by the ,federal ,reserve ,bank of ,new ,york 7or a successor administrator74 7#bj7 ,tenor spread adjustment ,the term tenor spread adjustment means-- 7,a7 #j4jjfdd percent for overnight ,,libor2 7,b7 #j4aaddh percent for #a-month ,,libor2 7,c7 #j4bfafa percent for #c-month ,,libor2 7,d7 #j4dbhbf percent for #f-month ,,libor2 and 7,e7 #j4gaeac percent for #ab-month ,,libor4 #d4 ,libor contracts 7a7 ,in general ,on the ,,libor replacement date1 the ,board-selected benchmark replacement shall be the benchmark replacement for any ,,libor contract that1 after giving any effect to subsection 7b7-- 7#a7 contains no fallback provisions2 or 7#b7 contains fallback provisions that identify neither-- 7,a7 a specific benchmark replacement2 nor 7,b7 a determining person4 7b7 ,fallback provisions ,on the ,,libor replacement date1 any reference in the fallback provisions of a ,,libor contract to-- 7#a7 a benchmark replacement that is based in any way on any ,,libor value1 except to account for the difference between ,,libor and the benchmark replacement2 or 7#b7 a requirement that a person 7other than a benchmark administrator7 conduct a poll1 survey1 or inquiries for quotes or information concerning interbank lending or deposit rates2 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 effect4 7c7 ,authority of determining person 7#a7 ,in general ,subject to subsection 7f77#b71 a determining person may select the ,board-selected benchmark replacement as the benchmark replacement4 7#b7 ,selection ,any selection by a determining person of the ,board-selected benchmark replacement pursuant to paragraph 7#a7 shall be-- 7,a7 irrevocable2 7,b7 made by the earlier of the ,,libor replacement date and the latest date for selecting a benchmark replacement according to the terms of the ,,libor contract2 and 7,c7 used in any determinations of the benchmark under or with respect to the ,,libor contract occurring on and after the ,,libor replacement date4 7#c7 ,no selection ,if a determining person does not select a benchmark replacement by the date specified in paragraph 7#b77;,b71 the ,board-selected benchmark replacement1 on and after the ,,libor replacement date1 shall be the benchmark replacement for the ,,libor contract4 7d7 ,conforming changes 7#a7 ,in general ,if the ,board-selected benchmark replacement becomes the benchmark replacement for a ,,libor contract pursuant to subsection 7a7 or 7c71 all benchmark replacement conforming changes shall become an integral part of the ,,libor contract4 7#b7 ,no consent required ,a calculating person shall not be required to obtain consent from any other person prior to the adoption of benchmark replacement conforming changes4 7e7 ,adjustment by ,board 7#a7 ,in general ,except as provided in paragraph 7#b71 on the ,,libor replacement date1 the ,board shall adjust the ,board-selected benchmark replacement for each category of ,,libor contract that the ,board may identify to include the relevant tenor spread adjustment4 7#b7 ,consumer loans ,for ,,libor contracts that are consumer loans1 the ,board shall adjust the ,board-selected benchmark replacement as follows3 7,a7 ,during the #a-year period beginning on the ,,libor replacement date1 incorporate an amount1 to be determined for any business day during that period1 that transitions linearly from the difference between the ,board-selected benchmark replacement and the corresponding ,,libor tenor determined as of the day immediately before the ,,libor replacement date to the relevant tenor spread adjustment4 7,b7 ,on and after the date that is #a year after the ,,libor replacement date1 incorporate the relevant tenor spread adjustment4 7f7 ,rule of construction ,nothing in this ,act may be construed to alter or impair-- 7#a7 any written agreement specifying that a ,,libor contract shall not be subject to this ,act2 7#b7 except as provided in subsection 7b71 any ,,libor contract that contains fallback provisions that identify a benchmark replacement that is not based in any way on any ,,libor value 7including the prime rate or the effective ,federal funds rate72 7#c7 except as provided in subsection 7b7 or 7c77#c71 any ,,libor contract subject to subsection 7c77#a7 as to which a determining person does not elect to use a ,board-selected benchmark replacement pursuant to that subsection2 7#d7 the application to a ,board-selected benchmark replacement of any cap1 floor1 modifier1 or spread adjustment to which ,,libor had been subject pursuant to the terms of a ,,libor contract2 7#e7 any provision of ,federal consumer financial law that-- 7,a7 requires creditors to notify borrowers regarding a change-in-terms2 or 7,b7 governs the reevaluation of rate increases on credit card accounts under open-ended 7not home-secured7 consumer credit plans2 or 7#f7 except as provided in section #e7;c71 the rights or obligations of any person1 or the authorities of any agency1 under ,federal consumer financial law1 as defined in section #ajjb of the ,consumer ,financial ,protection ,act of #bjaj 7#ab ,u4,s4,c4 #edha74 #e4 ,continuity of contract and safe harbor 7a7 ,in general ,a ,board-selected benchmark replacement and the selection or use of a ,board-selected benchmark replacement as a benchmark replacement under or with respect to a ,,libor contract1 and any benchmark replacement conforming changes1 shall constitute-- 7#a7 a commercially reasonable replacement for and a commercially substantial equivalent to ,,libor2 7#b7 a reasonable1 comparable1 or analogous rate1 index1 or term for ,,libor2 7#c7 a replacement that is based on a methodology or information that is similar or comparable to ,,libor2 7#d7 substantial performance by any person of any right or obligation relating to or based on ,,libor2 and 7#e7 a replacement that has historical fluctuations that are substantially similar to those of ,,libor for purposes of the ,truth in ,lending ,act 7#ae ,u4,s4,c4 #afja note7 and regulations promulgated under that ,act4 7b7 ,no impairment ,neither the selection or use of a ,board-selected benchmark replacement as a benchmark replacement nor the determination1 implementation1 or performance of benchmark replacement conforming changes under section #d may-- 7#a7 be deemed to impair or affect the right of any person to receive a payment1 or to affect the amount or timing of such payment1 under any ,,libor contract2 or 7#b7 have the effect of-- 7,a7 discharging or excusing performance under any ,,libor contract for any reason1 claim1 or defense 7including any force majeure or other provision in any ,,libor contract72 7,b7 giving any person the right to unilaterally terminate or suspend performance under any ,,libor contract2 7,c7 constituting a breach of any ,,libor contract2 or 7,d7 voiding or nullifying any ,,libor contract4 7c7 ,safe harbor ,no person shall be subject to any claim or cause of action in law or equity or request for equitable relief1 or have liability for damages1 arising out of-- 7#a7 the selection or use of a ,board-selected benchmark replacement1 7#b7 the implementation of benchmark replacement conforming changes1 or 7#c7 with respect to a ,,libor contract that is not a consumer loan1 the determination of benchmark replacement conforming changes1 in each case after giving effect to the provisions of section #d2 provided1 however1 that in each case any person 7including a calculating person7 shall remain subject to the terms of a ,,libor contract that are not affected by this ,act and any existing legal1 regulatory1 or contractual obligations to correct servicing or other ministerial errors under or with respect to a ,,libor contract4 7d7 ,selection ,the selection or use of a ,board-selected benchmark replacement or the determination1 implementation1 or performance of benchmark replacement conforming changes under section #d shall not be deemed to-- 7#a7 be an amendment or modification of any ,,libor contract2 or 7#b7 prejudice1 impair1 or affect the rights1 interests1 or obligations of any person under or with respect to any ,,libor contract4 7e7 ,no negative inference ,except as provided in subsection 7a71 7b71 or 7c77#a7 of section #d1 nothing in this ,act may be construed to create any negative inference or negative presumption regarding the validity or enforceability of-- 7#a7 any benchmark replacement 7including any method for calculating1 determining1 or implementing an adjustment to the benchmark replacement to account for any historical differences between ,,libor and the benchmark replacement7 that is not a ,board-selected benchmark replacement2 or 7#b7 any changes1 alterations1 or modifications to or with respect to a ,,libor contract that are not benchmark replacement conforming changes4 #f4 ,benchmark for loans 7a7 ,definitions ,in this section3 7#a7 ,bank ,the term bank means an institution subject to examination by a ,federal financial institutions regulatory agency4 7#b7 ,covered action ,the term covered action means-- 7,a7 the initiation by a ,federal supervisory agency of an enforcement action1 including the issuance of a cease-and-desist order2 or 7,b7 the issuance by a ,federal supervisory agency of a matter requiring attention1 a matter requiring immediate attention2 or a matter requiring board attention resulting from a supervisory activity conducted by the ,federal supervisory agency4 7#c7 ,federal financial institutions regulatory agency ,the term ,federal financial institutions regulatory agencies has the meaning given the term in section #ajjc of the ,federal ,financial ,institutions ,examination ,council ,act of #aigh 7#ab ,u4,s4,c4 #ccjb74 7#d7 ,federal supervisory agency ,the term ,federal supervisory agency means an agency listed in subparagraphs 7,a7 through 7,h7 of section #aaja7g7 of the ,right to ,financial ,privacy ,act of #aigh 7#ab ,u4,s4,c4 #cdja7g774 7#e7 ,non-,,ibor loan ,the term non-,,ibor loan means any loan that1 by its terms1 does not use in any way ,,libor1 any tenor of non-,u4,s4 dollar currency rates formerly known as the ,london interbank offered rate as administered by ,,ice ,benchmark ,administration ,limited 7or any predecessor or successor administrator thereof71 and any other interbank offered rates that are expected to cease1 as a benchmark4 7b7 ,benchmarks used by banks ,with respect to a benchmark used by a bank-- 7#a7 the bank1 in any non-,,ibor loan made before1 on1 or after the date of enactment of this ,act1 may use any benchmark1 including a benchmark that is not ,,sofr1 that the bank determines to be appropriate for the funding model of the bank2 the needs of the customers of the bank2 and the products1 risk profile1 risk management capabilities1 and operational capabilities of the bank2 provided1 however1 that the use of any benchmark shall remain subject to the terms of the non-,,ibor loan1 and applicable law2 and 7#b7 no ,federal supervisory agency may take any covered action against the bank solely because that benchmark is not ,,sofr4 #g4 ,preemption ,this ,act1 and regulations promulgated under this ,act1 shall supersede any provision of any ,state or local law1 statute1 rule1 regulation1 or standard-- 7#a7 relating to the selection or use of a benchmark replacement or related conforming changes2 or 7#b7 expressly limiting the manner of calculating interest1 including the compounding of interest1 as that provision applies to the selection or use of a ,board-selected benchmark replacement or benchmark replacement conforming changes4 #h4 ,trust ,indenture ,act of #aici ,section #caf7;b7 of the ,trust ,indenture ,act of #aici 7#ae ,u4,s4,c4 #ggppp7b77 is amended-- 7#a7 by striking 1 except as and inserting 81 except-- 7#a7 as 2 7#b7 in paragraph 7#a71 as so designated1 by striking 7a71 and except that and inserting 87a72 7#b7 that 2 7#c7 in paragraph 7#b71 as so designated1 by striking the period at the end and inserting 2 and2 and 7#d7 by adding at the end the following3 7#c7 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 #d of the ,adjustable ,interest ,rate 7,,libor7 ,act to any indenture security4 4 #i4 ,amendment to the ,higher ,education ,act of #aife ,section #dch7;b77#b77;,i7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhg-a7;b77#b77;,i77 is amended by adding at the end the following3 7viii7 ,revised calculation rule to address instances where #a-month ,,usd ,,libor ceases or is non-representative 7,i7 ,substitute reference index ,the provisions of this clause apply to loans for which the special allowance payment would otherwise be calculated pursuant to clause 7vii74 7,,ii7 ,calculation based on ,,sofr ,for loans described in subclause 7,,iii7 or 7,,iv71 the special allowance payment described in this subclause shall be substituted for the payment provided under clause 7vii74 ,for each calendar quarter1 the formula for computing the special allowance that would otherwise apply under clause 7vii7 shall be revised by substituting of the quotes of the #cj-;day ,average ,secured ,overnight ,financing ,rate 7,,sofr7 in effect for each of the days in such quarter as published by the ,federal ,reserve ,bank of ,new ,york 7or a successor administrator71 adjusted daily by adding the tenor spread adjustment1 as that term is defined in the ,adjustable ,interest ,rate 7,,libor7 ,act1 for #a-month ,,libor contracts of #j4aaddh percent for of the #a-month ,london ,inter ,bank ,offered ,rate 7,,libor7 for ,united ,states dollars in effect for each of the days in such quarter as compiled and released by the ,british ,bankers ,association4 ,the special allowance calculation for loans subject to clause 7vii7 shall otherwise remain in effect4 7,,iii7 ,loans eligible for ,,sofr-based calculation ,except as provided in subclause 7,,iv71 the special allowance payment calculated under subclause 7,,ii7 shall apply to all loans for which the holder 7or1 if the holder acts as an eligible lender trustee for the beneficial owner of the loan1 the beneficial owner of the loan7 at any time after the effective date of this clause notifies the ,secretary that the holder or beneficial owner affirmatively and permanently elects to waive all contractual1 statutory1 or other legal rights to a special allowance paid under clause 7vii7 or to the special allowance paid pursuant to any other formula that was previously in effect with respect to such loan1 and accepts the rate described in subclause 7,,ii74 ,any such waiver shall apply to all loans then held1 or to be held from time to time1 by such holder or beneficial owner2 provided that1 due to the need to obtain the approval of1 demonstrated to the satisfaction of the ,secretary-- 7aa7 one or more third parties with a legal or beneficial interest in loans eligible for the ,,sofr-based calculation2 or 7bb7 a nationally recognized rating organization assigning a rating to a financing secured by loans otherwise eligible for the ,,sofr-based calculation1 the holder of the loan 7or1 if the holder acts as an eligible lender trustee for the beneficial owner of the loan1 the beneficial owner of the loan7 may elect to apply the rate described in subclause 7,,ii7 to specified loan portfolios established for financing purposes by separate notices with different effective dates4 ,the special allowance rate based on ,,sofr shall be effective with respect to a portfolio as of the first day of the calendar quarter following the applicable effective date of the waiver received by the ,secretary from the holder or beneficial owner and shall permanently and irrevocably continue for all subsequent quarters4 7,,iv7 ,fallback provisions 7aa7 ,in the event that a holder or beneficial owner has not elected to waive its rights to a special allowance payment under clause 7vii7 with respect to a portfolio with an effective date of the waiver prior to the first of-- 7,,aa7 the date on which the ,,ice ,benchmark ,administration 7,,iba7 has permanently or indefinitely stopped providing the #a-month ,united ,states ,dollar ,,libor 7#a-month ,,usd ,,libor7 to the general public2 7,,bb7 the effective date of an official public statement by the ,,iba or its regulator that the #a-month ,,usd ,,libor is no longer reliable or no longer representative2 or 7,,cc7 the ,,libor replacement date1 as defined in section #c of the ,adjustable ,interest ,rate 7,,libor7 ,act1 the special allowance rate calculation as described in subclause 7,,ii7 shall1 by operation of law1 apply to all loans in such portfolio4 7bb7 ,in such event-- 7,,aa7 the last determined rate of special allowance based on #a-month ,,usd ,,libor will continue to apply until the end of the then current calendar quarter2 and 7,,bb7 the special allowance rate calculation as described in subclause 7,,ii7 shall become effective as of the first day of the following calendar quarter and remain in effect for all subsequent calendar quarters4 4 #aj4 ,rulemaking ,not later than #ahj days after the date of enactment of this ,act1 the ,board shall promulgate regulations to carry out this ,act4