About LIBOR transition

The interest rate benchmark LIBOR is being wound down. The majority of LIBOR panels have ended and their settings ceased or are permanently unrepresentative. The overnight, 1-month, 3-month, 6-month and 12-month US dollar LIBOR settings are continuing under a panel bank methodology until the end of June 2023. Firms must take appropriate action now to transition to alternative rates. Find out why.

Prior to end-2021, LIBOR was produced in 7 tenors (overnight/spot next, 1 week, 1-month, 2-month, 3-month, 6-month and 12-month) across 5 currencies. Each of these LIBOR settings was based on submissions provided by a panel of banks. These submissions were intended to reflect the interest rate at which banks could borrow money on unsecured terms in wholesale markets.

Background to LIBOR being wound down

In 2017, the FCA and the Bank of England’s Financial Policy Committee (FPC) noted 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.

The LIBOR panel banks agreed to continue submitting to LIBOR until end-2021 (subsequently extended to end-June 2023 for US dollar LIBOR only), to enable time for the market to transition away from LIBOR.

In March 2021, the FCA and ICE Benchmark Administration (the administrator of LIBOR) announced that sterling, euro, Swiss franc and Japanese yen LIBOR panels, as well as panels for 1-week and 2-month US dollar LIBOR, will cease at end-2021, with the remaining US dollar LIBOR panels ceasing at end-June 2023.

We confirmed our decision to use powers, which the Government granted us under the Benchmarks Regulation, to require continued publication on a changed methodology (also known as a 'synthetic') basis for the 1-month, 3-month and 6-month sterling LIBOR settings and, until end-2022, the same Japanese yen LIBOR settings. These synthetic LIBOR rates are not intended for use in new contracts, but are available for some holders of 'legacy' LIBOR-referencing contracts.

We will continue considering the case for using these powers for the 1-month, 3-month and 6-month US dollar LIBOR settings, when the US dollar LIBOR panel ends in June 2023, but market participants should not rely on our doing so.

All market participants need to take appropriate action now to remove remaining dependencies on LIBOR. We have written a number of Dear CEO letters to regulated firms setting out our expectations.

Transition to alternative risk-free rates

International coordination on benchmark reform

Page updates

04/01/2022: Information added majority of LIBOR panels have ended and their settings ceased or are permanently unrepresentative
10/12/2021: Information added following FS21/12 publication
29/09/2021: Information added confirmed our decision to use new powers for certain legacy contracts
26/03/2021: Information added
19/01/2021: Information added ISDA Protocol section.
19/01/2021: Information added ISDA Protocol section.