Libor Replacement Carries Risk for States and Cities, Group Says - ABI

The end of the London interbank offered rate after 2021 could have costly consequences for states and cities, and managers need to start preparing, the Government Finance Officers Association said yesterday, Bloomberg News reported. About $44 billion of floating-rate municipal bonds and an unknown amount of loans and interest-rate swaps entered into by states and cities are tied to the U.S. dollar Libor. Many of these securities and contracts will continue long after 2021, when Libor is phased out. Municipalities will need to take inventory of debt and investments tied to Libor, and hire lawyers and advisers to review contracts and renegotiate them before 2022, according to the GFOA. States and cities should also develop mechanisms to transfer Libor-based products to the Secured Overnight Financing Rate, Libor’s replacement.

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