We set out our feedback on responses to our proposal to use our Article 23C and Article 21A powers under the Benchmarks Regulation (BMR) for certain LIBOR settings.
Why we consulted
On 20 May 2021 we consulted on our proposed policies on the exercise of 2 powers introduced through amendments to the BMR under the Financial Services Act 2021 (FS Act). That consultation closed on 17 June and we have published our Feedback Statement (FS21/10) and final Statements of Policy (Article 21A and Article 23C under the BMR).
CP21/29 sought views on our proposed decisions on whether and how to:
- permit legacy use of 1 month, 3 month and 6 month sterling and 1 month, 3 month and 6 month yen LIBOR from 1 January 2022
- prohibit new use of overnight, 1 month, 3 month, 6 month and 12 month US dollar LIBOR
On 16 November, following our review and consideration of responses to our consultation, we published a Notice setting out our decision under Article 21A, and a draft Notice setting out our decision under Article 23C, and the reasons for them, in line with the relevant requirements under the BMR.
This Feedback Statement provides more details of the feedback we received and our response.
Who this affects
This Feedback Statement will interest users of the 6 LIBOR settings that will move to a synthetic methodology from 1 January 2022, and users of the continuing US dollar LIBOR settings whether regulated or unregulated. This includes:
- banks and building societies
- investment managers
- life insurance and pension providers
- mortgage lenders and intermediaries
- non-financial corporates of all sizes
- consumers who have mortgages and other consumer loans that use these LIBOR settings
Background to the Benchmarks Regulation work
The powers under Article 23C(2) and Article 21A of the BMR relate to the use of critical benchmarks, where this use is within scope of the BMR (‘use of a benchmark’ is defined at Article 3(1)(7)). They were introduced as part of a wider package of amendments to the BMR.
This package was intended to ensure that we have the appropriate regulatory powers to help reduce risks to market integrity and consumer protection in the wind-down period before LIBOR ceases permanently.
We will publish the final Notice under Article 23C on 1 January 2022, in line with the draft Notice we published in November.
We encourage users of LIBOR to continue to focus on active transition and move their contracts away from LIBOR wherever possible, rather than relying on synthetic LIBOR, which will not be published indefinitely.
Similarly, it is also important that market participants understand if and how exercising our new use restriction power will affect them and take any necessary steps to prepare themselves.