Benchmarks Regulation: our powers, policy and decision-making

We set our policy approach to exercising our powers over critical benchmarks, and our decisions to use these powers to help manage an orderly wind-down of LIBOR.

Benchmarks are used in a wide range of markets to help set prices, measure performance, or work out amounts payable under financial contracts. They are integral to the functioning of many financial markets.

The amendments to the Benchmarks Regulation in the Financial Services Act 2021 (FS Act) gave us new powers. The FS Act requires us to publish Statements of Policy before exercising certain powers and we must have regard to them when exercising these powers. We said in June 2020 that we would engage with the market when developing these Statements of Policy.

We consulted on some of our proposals in November 2020 and have set out our final policy on:

We took account of responses to our engagement. See Article 23A and 23D consultation papers.

In May 2021, we consulted on our proposed policy for using 2 of our other powers and have now published Statements of Policy. These powers relate to the use of critical benchmarks that are being wound down:

  • Permitting legacy use of an Article 23A benchmark under Article 23C.
  • Restricting new use of a ceasing critical benchmark under Article 21A.

We have also published a Feedback Statement (FS21/10).

We may reissue a revised Statement of Policy in future if our policy changes for any of the powers set out above.

In June 2021, we published a further consultation on our proposed decision under Article 23D, to require a change in methodology for 6 sterling and Japanese yen LIBOR settings. The consultation closed on 27 August 2021.

In September 2021, following our consultation, we published a draft Notice confirming our decision to use the Article 23D power after end-2021 in relation to these 6 sterling and Japanese yen LIBOR settings.

We also issued Notices confirming our decisions to designate these 6 sterling and Japanese yen LIBOR settings as permanently unrepresentative Article 23A benchmarks, and to compel their continued publication (on the basis of a changed 'synthetic' methodology) from end-2021.

These designation decisions took effect at 00:01 on 1 January 2022. Therefore, these 6 sterling and yen LIBOR settings are now permanently unrepresentative Article 23A benchmarks under the Benchmarks Regulation.

In September 2021, we published a consultation on our proposed decisions under Article 23C and Article 21A. This consultation set out specifically which legacy contracts would be permitted to use the 'synthetic' sterling and Japanese yen LIBOR rates, and how we would restrict new use of the US dollar LIBOR settings that are continuing until mid-2023.

In November 2021, we published a draft Notice with our decisions on permitting legacy use of the 6 sterling and Japanese yen LIBOR settings designated as Article 23A benchmarks under Article 23C. We also published a Notice confirming our decision regarding prohibition of new use of US dollar LIBOR under Article 21A.

In November 2021, we published a Feedback Statement (FS21/11) on responses to our Article 23D decision consultation.

In December 2021, we published a Feedback Statement (FS21/12) on responses to our Article 23C and Article 21A decision consultation.

On 1 January 2022, we issued the Notices under Article 23C and Article 23D in substantially the same form as their draft versions and the requirements became effective immediately.

Next steps 

We will seek views on retiring 1-month and 6-month synthetic sterling LIBOR at the end of 2022, and on when to retire 3-month sterling synthetic LIBOR, via a public consultation around the end of Q2 / early Q3 2022.

Who these documents apply to

We expect this work to be of interest to:

  • administrators of critical benchmarks
  • contributors to critical benchmarks
  • all users of critical benchmarks, both regulated and unregulated

Overview

We explain the above and give more detail about our specific powers under the Benchmarks Regulation in our overview document.

Page updates

25/04/2022: Information added next steps section
04/01/2022: Publication added on 1 January 2022, we issued the Notices under Articles 23C and 23D
01/01/2022: Information added updated as designation decisions took effect on 1 January 2022
10/12/2021: Information added following FS21/12 publication
16/11/2021: Information added following publication of FS21/11, Article 23C draft Notice and Article 21A Notice
29/09/2021: Information added regarding statements of policy, notices, draft notice, feedback statement to CP21/15 and new CP21/29
22/07/2021: Information changed We plan to undertake a short consultation in Q3 of 2021