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
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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