"With limited time remaining, my message to firms is clear – act now and complete your transition by the end of 2021."
The FCA has announced the dates that panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available.
The FCA has confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative:
- immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and
- immediately after 30 June 2023, in the case of the remaining US dollar settings.
Publication of most of the LIBOR settings will cease immediately after these dates. As ISDA has confirmed separately, the ‘spread adjustments’ to be used in its IBOR fallbacks will be fixed today as a result of the FCA’s announcement, providing clarity on the future terms of the many derivative contracts which now incorporate these fallbacks.
The FCA says regulated firms should expect further engagement from their supervisors at both the Prudential Regulation Authority and the FCA to ensure these timelines are met.
The FCA has recognised that there are some existing LIBOR contracts which are particularly difficult to amend ahead of the LIBOR panels ceasing, often known as the ‘tough legacy’ and says it is taking steps to help reduce disruption in these cases. The FCA will consult in Q2 on using proposed new powers that the government is legislating to grant to it under the Benchmarks Regulation (BMR) to require continued publication on a ‘synthetic’ basis for some sterling LIBOR settings and, for one additional year, some Japanese yen LIBOR settings. It will also continue to consider the case for using these powers for some US dollar LIBOR settings. Any ‘synthetic’ LIBOR will no longer be representative for the purposes of the BMR and is not for use in new contracts. The FCA will also consult in Q2 on which legacy contracts will be permitted to use any ‘synthetic’ LIBOR rate.
The FCA has also published today statements of policy in relation to some of these proposed new BMR powers. These statements of policy confirm its policy approach, explain its plans set out above and its intention to propose using, as a methodology for any ‘synthetic rate’, a forward-looking term rate version of the relevant risk-free rate plus a fixed spread aligned with the spreads in ISDA’s IBOR fallbacks.
FCA CEO, Nikhil Rathi, commented: "Today’s announcements provide certainty on when the LIBOR panels will end. Publication of most of the LIBOR benchmarks will cease at the same time as the panels end. Market participants must now complete their transition plans."
Bank of England Governor, Andrew Bailey, said: "Today’s announcements mark the final chapter in the process that began in 2017, to remove reliance on unsustainable LIBOR rates and build a more robust foundation for the financial system. With limited time remaining, my message to firms is clear – act now and complete your transition by the end of 2021."