The interest rate benchmark LIBOR is being wound down. Find out why firms must take appropriate action now to transition to appropriate alternative rates.
Before 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. All LIBOR panels have now ended and the majority of their settings ceased or become permanently unrepresentative.
Following the final publication of the 3-month synthetic sterling LIBOR setting on 28 March 2024, all sterling LIBOR settings have now permanently ceased.
The overnight and 12-month US dollar LIBOR settings ceased permanently at the end of June 2023. The 1-month, 3-month and 6-month synthetic US dollar LIBOR settings are the final remaining LIBOR settings.
We continue to require LIBOR’s administrator, ICE Benchmark Administration, to publish the 1-month, 3-month and 6-month US dollar LIBOR settings using a synthetic methodology. We expect these settings to cease permanently at the end of September 2024.
Background to LIBOR being wound down
In 2017, the FCA and the Financial Policy Committee[1] (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[2].
The LIBOR panel banks agreed to continue submitting to LIBOR until end-2021 (later extended to end-June 2023 for US dollar LIBOR only), to enable time for the market to move away from LIBOR.
In March 2021, the FCA[3] and ICE Benchmark Administration[4] (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[5] 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 were not intended for use in new contracts, but were available for some holders of 'legacy' LIBOR-referencing contracts.
In September 2022, we confirmed[6] that publication of 1-month and 6-month synthetic sterling LIBOR would be required until end-March 2023, after which these settings would cease permanently.
In November 2022, we announced[7] that we intended to compel the publication of 3-month synthetic sterling LIBOR until end-March 2024, after which it would cease permanently. We also published a consultation[8] on our proposals to use our powers to require continued publication of the 1-month, 3-month, and 6-month US dollar LIBOR settings under a synthetic methodology for a temporary period until end-September 2024.
In April 2023, we announced[9] that we intended to compel the publication of the 1-month, 3-month and 6-month US dollar LIBOR settings under a synthetic methodology until end-September 2024 for use in all legacy contracts other than cleared derivatives. In May 2023, we published a detailed Feedback Statement[8] setting out our response to the feedback received to our November consultation.
