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.

Regulators ICE Bch; UK FCA
Entity Types B/D; Bank; BS; CU; Depo; Exch; IA; IB; Ins; Inv Co; MG Orig; MSB; Pension; Servicer; Thrift
Reference PS, CP CP22/21, PR, 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
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 1/6/2023
Rule Id 154285
Linked to Rule :149265
Reg. Last Update 11/23/2022
Report Section UK

Last substantive update on 11/24/2022