UK FCA Further LIBOR Consultation


On Nov. 23, UK FCA issued update and LIBOR wind-down proposals.


  • FCA issued further consultation to use powers to require continued publication of 1-,3- and 6-month US dollar LIBOR settings under synthetic methodology to end Sep. 2024.
  • Also announced intention to require continued publication of the 3-month synthetic sterling LIBOR setting until end-Mar. 2024, after which setting will cease permanently.
  • Follows UK FCA Sep. 2022 announced 1-, 6-month settings cessation, see #149265.
  • Also follows UK FCA Jun. 2022 proposed winding down synthetic LIBOR, see #142128.
  • Consultation
  • In Jun. 2022 the FCA consultation CP22/11 sought information on US dollar LIBOR exposures, having considered responses regulator is consulting on further proposals.
  • Regulator considers there is a case for: requiring publication of the 1-, 3- and 6-month synthetic US dollar LIBOR settings for a short period, that is, until end of Sep. 2024.
  • Also, using CME Term SOFR plus the relevant ISDA fixed spread adjustment as the methodology for these synthetic US dollar LIBOR settings; and for permitting use of these synthetic US dollar LIBOR settings in all contracts except cleared derivatives.
  • Announcement on Sterling LIBOR
  • In Sep. 2022, FCA announced it will require LIBOR administrator, ICE Bch, to continue to publish the 1- and 3-month synthetic sterling LIBOR settings for a further 3 months.
  • Until the end of Mar. 2023, after which these LIBOR settings will cease permanently.
  • FCA reconfirms this requirement, those market participants who still have contracts referencing 3-month sterling LIBOR should ensure prepared for publication to cease.
  • Effect
  • Effect of the proposals and FCA's announcement on the continued publication of the 3-month synthetic LIBOR setting is that final LIBOR publication would be end Sep. 2024.
  • The 3 synthetic yen LIBOR settings will cease end-2022; 1- and 6-month synthetic sterling LIBOR settings cease end-Mar. 2023; overnight and 12-month US dollar LIBOR settings to cease end-Jun. 2023; 3-month synthetic sterling LIBOR at end-Mar. 2024.
  • 1-, 3-, 6-month synthetic US dollar LIBOR settings proposed to cease end Sep. 2024.
  • FCA emphasizes that any synthetic LIBOR settings are only a bridge to appropriate alternative risk-free rates, market participants should prioritize active transition.
  • And focus on converting their legacy contracts to risk-free rates as soon as possible.
  • Guidance
  • FCA updated LIBOR guidance pages to reflect consultation and announcement, these include About LIBOR transition page, LIBOR transition, and LIBOR resources page.
  • Effectiveness
  • Consultation will remain open until Jan. 6, 2023, FCA expects to announce its final decision on how to move forward with wind-down of LIBOR in late Q1/early Q2 2023.
  • Dec. 2022 3-Month Sterling LIBOR
  • On Dec. 14, 2022, UK FCA published decision notice 608291 dated Nov. 23, 2022.
  • Confirmed decision to compel ICE Benchmark Administration Limited (ICE Bch) to continue publishing 3 month sterling LIBOR (LIBOR Version) for a period of 12 months starting immediately after the final publication of the LIBOR Version on Dec. 30, 2022.
  • And, therefore, before the LIBOR Version would otherwise cease.
  • Subject to the reviews required by Article 21(3) of the Benchmarks Regulation, the Authority intends to use its powers to compel ICE Bch to continue to publish the LIBOR Version for a final period until the end of March 2024; but not beyond that date.
  • On Jan. 2, 2022, ICE Bch updated guidance page on FCA's decisions, see #158442.
  • Jan. 3, 2023 Guidance Page Updated
  • On Jan. 3, 2023, UK FCA updated its webpage, Benchmarks Regulation: our powers, policy and decision-making, to include developments on the subject at end of 2022.
  • Update included regulator's strong encouragement to market participants to respond to CP22/21 on synthetic US LIBOR before the consultation closes on Jan. 6, 2023.
  • FCA also pointed out that as of Jan. 1, 2023 3 Japanese yen LIBOR settings published under a changed synthetic methodology have ceased permanently as planned.
  • 3 remaining sterling LIBOR settings issued under changed synthetic methodology have clear end dates: 1, 6-month settings end-March 2023, 3-month setting year later.
  • Jan. 6, 2023 ICMA Response
  • On Jan. 6, 2023, ICMA published response to FCA consultation, dated Dec. 20, 2022.
  • ICMA appreciates that setting a realistic target date for cessation of synthetic US dollar LIBOR should encourage active transition, in cases in which active transition feasible.
  • Unconditional commitment to cessation on Sep. 30, 2024 would run unnecessary risks.
  • Jan. 16, 2023 FCA Next Steps
  • On Jan. 16, 2023, UK FCA updated CP22/11 webpage to confirm consultation is closed.
  • Said will publish response to feedback received on proposals in late Q1/early Q2 2023.
  • Also updated its webpage, Benchmarks Regulation: our powers, policy and decision-making, to confirm that the consultation has closed and when to expect feedback.
  • Jan. 20, 2023 ICMSA Response
  • On Jan. 20, 2023, ICMSA published its response to FCA's proposals made in CP22/21.
  • Supports proposed introduction of synthetic equivalent of US LIBOR for suitable period to enable transition of large volume of floating rate debt securities referencing LIBOR.
  • Notes need to balance desire to transition away from use of all LIBOR settings asap with the risks of a premature transition away from setting still widely used in market.
  • Proposed end date of Sep. 30, 2024 for synthetic US dollar LIBOR publication gives meaningful period for transition, FCA should keep transaction numbers under review.
  • ICMSA encourages FCA to maintain engagement with US regulatory authorities to ensure transition pathway is clear for each of the legacy US dollar LIBOR securities.
  • In Apr. 2023, UK FCA announced decision on synthetic US dollar LIBOR, see #168463.
  • On Apr. 12, 2023, UK BoE, UK FCA reminded on end USD LIBOR panel, see #169174.
  • In May 2023, UK FCA issued update on imminent US dollar LIBOR end, see #174535.
  • In Dec. 2023, UK FCA confirmed end of 3-month sterling LIBOR setting, see #193476.

Regulators ICE Bch; ICMA; ICMSA; UK FCA
Entity Types B/D; Bank; BS; CU; Depo; Exch; IA; IB; Ins; Inv Co; MG Orig; MSB; Pension; Servicer; Thrift
Reference Rsp, PR 1/20/2023; PR 1/16/2023; PR 1/6/2022; Rsp 12/20/2022; Gd 1/3/2023; PR, 12/14/2022; PS, CP CP22/21, PR, Dec 608291, 11/23/2022; BMR Reg 2016/1011; FSA 2021 (UK); IBOR; RFR
Functions Compliance; Legal; Product Administration; Product Design; Reporting; Risk
Countries United Kingdom
Category Exchange Venue; National Regulator ; Trade Association
State
Products Banking; Cards; Commodities; Derivatives; Fixed Income; Fund Mgt; Insurance; Insurance-Casualty; Insurance-Health; Insurance-Life; Insurance-Property; Issuance/IPO; Loan; Mortgage; Pensions; Securities; Wealth Mgt
Regions EMEA
Rule Type Proposed
Rule Date 11/23/2022
Effective Date 1/20/2023
Rule Id 154285
Linked to Rule :149265
Reg. Last Update 1/20/2023
Report Section UK

Last substantive update on 01/24/2023