Transition from LIBOR

The interest rate benchmark LIBOR is expected to cease after end-2021. Firms must transition to alternative rates before this date. Find out more about ongoing transition initiatives and actions we are taking to facilitate the transition.

LIBOR is currently produced in 7 tenors (overnight/spot next, one week, one month, two months, three months, six months and 12 months) across 5 currencies. It is based on submissions provided by a panel of 20 banks. These submissions are intended to reflect the interest rate at which banks could borrow money on unsecured terms in wholesale markets. Both the FCA and the Bank of England’s Financial Policy Committee (FPC) noted in 2017 that it had become increasingly apparent that the absence of active underlying markets and the scarcity of term unsecured deposit transactions raised serious questions about the future sustainability of the LIBOR benchmarks.

We have received a voluntary agreement from the LIBOR panel banks to continue to submit to LIBOR until end-2021, to enable time for the market to transition away from LIBOR. All banks and other market participants need to have removed dependencies on LIBOR by this date if they are to avoid disruption when publication of LIBOR ceases.

In September 2018, we sent a joint Dear CEO letter with the PRA to major banks and insurers supervised in the UK, asking for the preparations and actions they are taking to manage the transition from LIBOR to alternative interest rate benchmarks. Based on the responses, we have published a feedback statement to help inform firms’ planning for the cessation of LIBOR. Furthermore, we wrote a Dear CEO Letter to all UK regulated asset management firms in February 2020 to set out our expectations as they prepare for the end of LIBOR.

We encourage all firms who currently rely on LIBOR to read, reflect and act on these communications. As well as banks, insurers and asset managers, the discontinuation of LIBOR will affect firms if they have not prepared for this event. We expect firms to take all reasonable steps to ensure the end of LIBOR does not lead to markets being disrupted or harm to consumers, and to support industry initiatives to ensure a smooth transition.

Transition to alternative risk-free rates

Alongside the Bank of England, we are working closely with market participants to support the transition away from LIBOR in sterling markets, particularly through the Working Group on Sterling Risk-Free Reference Rates (RFR Working Group).

In April 2017, the RFR Working Group recommended a reformed version of the Sterling Overnight Index Average (SONIA) benchmark as its preferred near Risk Free Rate (RFR) for sterling markets. This rate is administered by the Bank of England. Following its recommendation, the RFR Working Group is now focused on catalysing a broad-based transition to SONIA in sterling bond, loan and derivatives markets.

SONIA offers a robust alternative to LIBOR. The rate is based on overnight interest rates in wholesale markets, so is close to a risk-free measure of borrowing costs. The rate is robust and anchored to an active and liquid underlying market. It can be compounded over a lending period to produce a term interest rate. There are a number of advantages to borrowers and other market participants from using near RFRs, compounded as appropriate.

Further information on the RFR Working Group.

International coordination on benchmark reform

The Financial Stability Board’s (FSB) Official Sector Steering Group (OSSG) coordinates international efforts on benchmark reform and the transition from LIBOR. The OSSG is co-chaired by Andrew Bailey, Governor of the Bank of England and John Williams, President and CEO of the Federal Reserve Bank of New York.

In July 2016, the OSSG asked the International Swaps and Derivatives Association (ISDA) to lead work to enhance the robustness of derivatives contracts referencing widely-used benchmarks, such as LIBOR. ISDA has consulted on how best to calculate fair replacement rates for LIBOR in sterling, Swiss franc, Japanese yen and US dollars. These replacement rates are based on the RFRs recommended as alternatives to LIBOR by the relevant market-led working group for each jurisdiction, as follows.



Working Group

Alternative Ref Rate Name




United States of America

Alternative Reference Rates Committee

Secured Overnight Financing Rate (SOFR)

Federal Reserve Bank of New York


Secured rate that covers multiple overnight repo market segments

United Kingdom

Working Group on Sterling Risk-Free Reference Rates

Sterling Overnight Index Average (SONIA)

Bank of England


Unsecured rate that covers overnight wholesale deposit transactions


The National Working Group on CHF Reference Rates

Swiss Average Rate Overnight (SARON)

SIX Exchange


Secured rate that reflects interest paid on interbank overnight repo rate


Study Group on Risk-Free Reference Rates

Tokyo Overnight Average Rate (TONAR)

Bank of Japan


Unsecured rate that captures overnight call rate market

Euro area

Working Group on Risk-Free Reference Rates for the Euro Area

Euro short-term rate

European Central Bank


Unsecured rate that captures overnight wholesale deposit transactions

We also chair the Taskforce on Financial Benchmarks, which is part of the International Organization of Securities Commission’s (IOSCO). This taskforce considers a range of benchmark-related issues, including the transition away from LIBOR.

ISDA Protocol

On 23 October 2020, ISDA launched its IBOR Fallbacks Supplement to the 2006 ISDA Definitions and the ISDA 2020 IBOR Fallbacks Protocol. Through the FSB, authorities globally have strongly encouraged widespread and early adherence to the Protocol, which comes into effect on 25th January 2021 for all adhering parties. 

The FCA’s view is that amending a reference rate or adding a fallback would not trigger the application of margin or clearing requirements under EMIR, where this amendment relates to the treatment of legacy LIBOR trades (as set out previously in the minutes of the Working Group on Sterling Risk-Free Reference Rates meeting of 7 November 2019, paragraph 23).

Contact us

Firms should speak to their normal supervisory contact if they would like more information or contact us.

Key resources

FCA speeches 

FCA news and statements

FCA publications

Financial Stability Board publications

IOSCO publications

Other relevant publications

Page updates

19/01/2021: Information added ISDA Protocol section.
19/01/2021: Information added ISDA Protocol section.