New York Governor Andrew Cuomo has proposed legislation that would help prevent hundreds of billions of dollars of financial contracts from descending into chaos when the London interbank offered rate (LIBOR) expires.

Provisions to help troublesome LIBOR-linked contracts switch to replacement rates are contained in Cuomo's state budget plan, which was published on Tuesday. Bankers, investors, and regulators see such proposals as crucial to ensuring that a large swath of the global financial system isn't disrupted.

Various tenors of dollar LIBOR may be given a reprieve until mid-2023, in part to allow legacy contracts that lack a clear replacement rate to die off naturally. While that would help reduce the threat to financial stability, the most challenging floating-rate debt and securitizations—as well as LIBOR-based mortgages and student loans—will run on past the new deadline, making legislation critical. As home to the world's biggest financial center, much of the debt falls under New York law.