A bipartisan, ABA-advocated bill to address “tough legacy” Libor contracts is included in the omnibus spending bill that Congress is expected to pass in the coming days, Sen. Jon Tester (D-Mont.) said at the ABA Washington Summit yesterday. “We did get it put in the omnibus bill, which means by the end of this week, by tomorrow, it should be passed,” Tester said.

In a statement, ABA President and CEO Rob Nichols welcomed the inclusion of the provision, noting that “with this action today, Congress continues to express overwhelming support for a federal solution to ensure investors, consumers and issuers of securities avoid years of uncertainty and unexpected economic losses from Libor’s cessation.”

With two tenors of U.S. dollar Libor no longer being published and the remainder set to cease by June 30, 2023, the legislative language would direct the Federal Reserve to determine replacement rates for Libor-referencing contracts that lack fallback language and to provide a safe harbor from litigation over a change in rates after the cessation of Libor. A companion bill in the House, H.R. 4616, passed by an overwhelming bipartisan vote of 415-9 in December.

Meanwhile, Tester said he is continuing to push S. 3409, which would direct the federal banking agencies to fix the community bank leverage ratio at a level between 8% and 8.5%, down from 9%, through the end of 2024. “This is a problem, an unintended consequence” of bank balance sheets that ballooned after the pandemic crisis and the Paycheck Protection Program, Tester said. “It was spectacular work that community banks did and we need to make sure it doesn’t impact you in other ways.”