Fed Clears Hurdle for Up to $16 Trillion in Legacy Libor Deals

The Federal Reserve has identified benchmark rates in a long-awaited move aimed at preventing chaos in the transition away from the London interbank offered rate.

The central bank said Friday it finalized a rule that identifies rates based on the Secured Overnight Financing Rate, or SOFR, to replace Libor in contracts that don’t have a clear alternative once the dollar-denominated benchmark sunsets on June 30, 2023.

The decision fulfills guidelines set out in congressional legislation enacted in March to address the so-called tough legacy contracts and required the Fed to determine the replacement rates, as well as clarify who could ...