Regulations Implementing the Adjustable Interest Rate (LIBOR) Act

Following a corresponding press statement which announced the finalization of a rule to implement a new Statutory Instrument, namely 12 CFR Part 253, to transpose the Adjustable Interest Rate (LIBOR) Act of 2021, the Federal Reserve Board (FED) has now published in the Federal Register (FR) this final rule with a final effective date.
Specifically and as previously stated, the Board’s new rule determines diverse Secured Overnight Financing Rate (SOFR) tenors as the official replacement rates for the overnight and one-, three-, six-, and 12-month tenors of the U.S. dollar LIBOR (London InterBank Offered Rate) in order to prevent any uncertainty in credit and derivative markets for legacy contracts still referencing those LIBOR tenors and not having adequate fallback provisions following the upcoming cessation of the LIBOR.
The new instrument also defines the exact tenor spread adjustments for the corresponding SOFR tenors as follows:

The final rule also includes a „safe harbor“ that is provided in the LIBOR Act which states that financial contracts with terminating LIBOR rates that have the Board selected replacement rates in their fallback provisions will not be terminated as a result of the LIBOR termination.
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The final rule will come into force on February 27, 2023.