1. U.S. Code
  2. title 12
  3. chapter 55
  4. § 5804

Collapse to view only § 5804. Continuity of contract and safe harbor

§ 5801. Findings and purpose
(a) Findings
Congress finds that—
(1) LIBOR is used as a benchmark rate in more than $200,000,000,000,000 worth 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 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 rate.
(b) Purpose
It is the purpose of this chapter—
(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;
(3) to allow existing contracts that reference LIBOR but provide for the use of a clearly defined and practicable replacement rate, to operate according to their terms; and
(4) to address LIBOR references in Federal law.
(Pub. L. 117–103, div. U, § 102, Mar. 15, 2022, 136 Stat. 825.)

CITE AS: 12 USC 5801

§ 5802. Definitions
In this chapter:
(1) Benchmark
(2) Benchmark administrator
(3) Benchmark replacement
(4) Benchmark replacement conforming changes
The term “benchmark replacement conforming changes” means any technical, administrative, or operational changes, alterations, or modifications that—
(A) the Board determines, in its discretion, would address 1 or more issues affecting the implementation, administration, and calculation of the Board-selected benchmark replacement in LIBOR contracts; or
(B) solely with respect to a LIBOR contract that is not a consumer loan, 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 with respect to a LIBOR contract after giving due consideration to any benchmark replacement conforming changes under subparagraph (A).
(5) Board
(6) Board-selected benchmark replacement
(7) Calculating person
(8) Consumer; credit
(9) Consumer loan
(10) Determining person
(11) Fallback provisions
(12) IBOR
(13) IBOR benchmark replacement
(14) IBOR contract
(15) LIBOR
The term “LIBOR”—
(A) means 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 administrator thereof); and
(B) does not include the 1-week or 2-month tenors of U.S. dollar LIBOR.
(16) LIBOR contract
(17) LIBOR replacement date
(18) Security
(19) SOFR
(20) Tenor spread adjustment
The term “tenor spread adjustment” means—
(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.
(Pub. L. 117–103, div. U, § 103, Mar. 15, 2022, 136 Stat. 826.)

CITE AS: 12 USC 5802

§ 5803. LIBOR contracts
(a) In generalOn the LIBOR replacement date, the Board-selected benchmark replacement shall 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) Fallback provisionsOn the LIBOR replacement date, any reference 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) Authority of determining person
(1) In general
(2) SelectionAny selection by a determining person of the Board-selected benchmark replacement pursuant to paragraph (1) shall be—
(A) irrevocable;
(B) 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 contract; and
(C) used in any determinations of the benchmark under or with respect to the LIBOR contract occurring on and after the LIBOR replacement date.
(3) No selection
(d) Conforming changes
(1) In general
(2) No consent required
(e) Adjustment by Board
(1) In general
(2) Consumer loansFor LIBOR contracts that are consumer loans, the Board shall adjust the Board-selected benchmark replacement as follows:
(A) During the 1-year period beginning on the LIBOR replacement date, incorporate an amount, to be determined for any business day during that period, 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 adjustment.
(B) On and after the date that is 1 year after the LIBOR replacement date, incorporate the relevant tenor spread adjustment.
(f) Rule of constructionNothing in this chapter may be construed to alter or impair—
(1) any written agreement specifying that a LIBOR contract shall not be subject to this chapter;
(2) except as provided in subsection (b), any LIBOR contract that contains fallback provisions that identify a benchmark replacement that is not based in any way on any LIBOR value (including the prime rate or the effective Federal funds rate);
(3) except as provided in subsection (b) or (c)(3), any LIBOR contract subject to subsection (c)(1) as to which a determining person does not elect to use a Board-selected benchmark replacement pursuant to that subsection;
(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;
(5) any provision of Federal consumer financial law that—
(A) requires creditors to notify borrowers regarding a change-in-terms; or
(B) governs the reevaluation of rate increases on credit card accounts under open-ended (not home-secured) consumer credit plans; or
(6) except as provided in section 5804(c) of this title, the rights or obligations of any person, or the authorities of any agency, under Federal consumer financial law, as defined in section 5481 of this title.
(Pub. L. 117–103, div. U, § 104, Mar. 15, 2022, 136 Stat. 828.)

CITE AS: 12 USC 5803

§ 5804. Continuity of contract and safe harbor
(a) In generalA 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 contract, and any benchmark replacement conforming changes, 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 (15 U.S.C. 1601 note) 1
1 So in original. Probably should be “(15 U.S.C. 1601 et seq.)”
and regulations promulgated under that division.2
2 So in original. Probably should be “that Act.”
(b) No impairmentNeither the selection or use of a Board-selected benchmark replacement as a benchmark replacement nor the determination, implementation, or performance of benchmark replacement conforming changes under section 5803 of this title may—
(1) 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
(2) have the effect of—
(A) discharging or excusing performance under any LIBOR contract for any reason, claim, or defense (including any force majeure or other provision in any LIBOR contract);
(B) giving any person the right to unilaterally terminate or suspend performance under any LIBOR contract;
(C) constituting a breach of any LIBOR contract; or
(D) voiding or nullifying any LIBOR contract.
(c) Safe harborNo 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 out of—
(1) the selection or use of a Board-selected benchmark replacement;
(2) the implementation of benchmark replacement conforming changes; or
(3) with respect to a LIBOR contract that is not a consumer loan, the determination of benchmark replacement conforming changes,
in each case after giving effect to the provisions of section 5803 of this title; provided, however, that in each case any person (including a calculating person) shall remain subject to the terms of a LIBOR contract that are not affected by this division and any existing legal, regulatory, or contractual obligations to correct servicing or other ministerial errors under or with respect to a LIBOR contract.
(d) SelectionThe selection or use of a Board-selected benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes under section 5803 of this title shall not be deemed to—
(1) be an amendment or modification of any LIBOR contract; or
(2) prejudice, impair, or affect the rights, interests, or obligations of any person under or with respect to any LIBOR contract.
(e) No negative inferenceExcept as provided in subsections 3
3 So in original. Probably should be “subsection”.
(a), (b), or (c)(1) of section 5803 of this title, nothing in this chapter may be construed to create 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 with respect to a LIBOR contract that are not benchmark replacement conforming changes.
(Pub. L. 117–103, div. U, § 105, Mar. 15, 2022, 136 Stat. 830.)

CITE AS: 12 USC 5804

§ 5805. Benchmark for loans
(a) Definitions
In this section:
(1) Bank
(2) Covered action
The term “covered action” means—
(A) the initiation by a Federal supervisory agency of an enforcement action, including the issuance of a cease-and-desist order; or
(B) the issuance by a Federal supervisory agency of a matter requiring attention, a matter requiring immediate attention; or a matter requiring board attention resulting from a supervisory activity conducted by the Federal supervisory agency.
(3) Federal financial institutions regulatory agency
(4) Federal supervisory agency
(5) Non-IBOR loan
(b) Benchmarks used by banks
With respect to a benchmark used by a bank—
(1) the bank, in any non-IBOR loan made before, on, or after March 15, 2022, may use any benchmark, including a benchmark that is not SOFR, that the bank determines to be appropriate for the funding model of the bank; the needs of the customers of the bank; and the products, risk profile, risk management capabilities, and operational capabilities of the bank; provided, however, that the use of any benchmark shall remain subject to the terms of the non-IBOR loan, and applicable law; and
(2) no Federal supervisory agency may take any covered action against the bank solely because that benchmark is not SOFR.
(Pub. L. 117–103, div. U, § 106, Mar. 15, 2022, 136 Stat. 831.)

CITE AS: 12 USC 5805

§ 5806. Preemption
This chapter, and regulations promulgated under this chapter, shall supersede any provision of any State or local law, statute, rule, regulation, or standard—
(1) relating to the selection or use of a benchmark replacement or related conforming changes; or
(2) expressly limiting the manner of calculating interest, including the compounding of interest, as that provision applies to the selection or use of a Board-selected benchmark replacement or benchmark replacement conforming changes.
(Pub. L. 117–103, div. U, § 107, Mar. 15, 2022, 136 Stat. 832.)

CITE AS: 12 USC 5806

§ 5807. Rulemaking

Not later than 180 days after March 15, 2022, the Board shall promulgate regulations to carry out this chapter.

(Pub. L. 117–103, div. U, § 110, Mar. 15, 2022, 136 Stat. 834.)

CITE AS: 12 USC 5807