On Friday 5th March, the FCA announced the dates that panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available.
In a statement, which can be accessed here, the FCA announced that the following 26 LIBOR settings will permanently cease as follows:
- Immediately after 31 December 2021, publication of all 7 euro LIBOR settings, all 7 Swiss franc LIBOR settings, the Spot Next, 1-week, 2-month and 12-month Japanese yen LIBOR settings, the overnight, 1-week, 2-month and 12-month sterling LIBOR settings, and the 1-week and 2-month US dollar LIBOR settings will cease; and
- Immediately after 30 June 2023, publication of the overnight and 12-month US dollar LIBOR settings will cease immediately.
Due to the recognition by authorities that there will be LIBOR based contracts which will be particularly difficult to amend ahead of LIBOR rates ceasing to be available – often referred to as “tough legacy” – the FCA will be consulting on the continued publication on a non-representative, synthetic basis of certain sterling, yen and US dollar LIBOR settings. Also known as “synthetic LIBOR”.
The publication of synthetic LIBOR settings will be intended to assist tough legacy contract holders only, and as such, market participants should be reminded that new use of synthetic LIBOR settings by UK regulated firms in regulated financial instruments would be prohibited under the Financial Services Bill currently being enacted by Parliament. Continued use by regulated firms in legacy financial instruments would also be subject to the FCA using its proposed powers to permit such use. This area will undergo a further consultation process later on in the year which will provide more clarity as to which legacy uses of synthetic LIBOR settings might be permitted.
For more details, please speak to your usual Druces representative or contact: