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Introduction

LIBOR® is a short-term interest rate benchmark administered by ICE Benchmark Administration® Limited (“IBA”).

Currently, IBA publishes Overnight, 1-, 3-, 6- and 12-Months USD LIBOR settings using a “panel bank” methodology, based on panel bank submissions, and is being compelled by the UK Financial Conduct Authority (“FCA”) to publish 1-, 3- and 6-Months GBP and JPY LIBOR settings using a “synthetic” methodology, based on term risk-free rates and a fixed spread adjustment. All other LIBOR settings have ceased to be published.

IBA is the authorized administrator of LIBOR and is regulated by the FCA.

LIBOR Cessation and "Synthetic" LIBOR

Immediately prior to December 31, 2021, LIBOR was calculated for five currencies (USD, GBP, EUR, CHF and JPY) and for seven tenors in respect of each currency (Overnight/Spot Next, One Week, One Month, Two Months, Three Months, Six Months and 12 Months), resulting in the publication of 35 individual rates each applicable London business day.

LIBOR is now in the process of being wound down.

Settings which ceased after December 31, 2021

Publication of all CHF and EUR LIBOR settings, the 1 Week and 2 Months USD LIBOR settings, and the Overnight/Spot Next, 1 Week, 2 Months and 12 Months GBP and JPY LIBOR settings ceased after December 31, 20211.

USD Settings which continue until June 2023

Publication of the Overnight and the 1-, 3-, 6- and 12-Months USD LIBOR settings currently continues using panel bank contributions under the “panel bank” LIBOR methodology. IBA expects to continue to determine and publish these settings on this basis until end-June 20232, at which point panel banks will stop contributing and the Overnight and 12-Months USD LIBOR settings will cease3. The FCA has stated that it will consider the case for requiring continued publication of the 1-, 3-, and 6-Months USD LIBOR settings on a “synthetic” basis after June 2023, but if it does not require these setting to continue to be published, they will also cease at that time. The FCA is currently seeking information relating to USD LIBOR exposures in its consultation “Winding down 'synthetic' sterling LIBOR and US dollar LIBOR".

GBP and JPY Settings which continue on a synthetic basis

The FCA designated the 1-, 3- and 6-Months GBP and JPY LIBOR settings as “Article 23A benchmarks” for the purposes of the UK Benchmarks Regulation (the “BMR”) with effect from January 1, 2022, and is compelling IBA to publish these settings for the duration of 2022. The FCA requires IBA to calculate these settings using a changed, “synthetic” methodology4. The “synthetic” methodology is not based on panel bank contributions and the resulting settings are not representative of the underlying market or economic reality they were intended to measure before designation as “Article 23A benchmarks”, including for the purposes of the BMR. The FCA is currently seeking views on ceasing the requirement for IBA to continue publication of the “synthetic” 1- and 6-Months GBP LIBOR settings at the end of March 2023, and on when it will be possible to cease the requirement in respect of “synthetic” 3-Months GBP LIBOR, in its consultation “Winding down 'synthetic' sterling LIBOR and US dollar LIBOR”. The FCA has stated that the “synthetic” JPY LIBOR settings will cease at end-2022.

1 The FCA announced these cessations on March 5, 2021.

2 The FCA has confirmed that it expects these settings will continue to be published on a representative basis, using panel bank contributions under the “panel bank” LIBOR methodology, until end-June 2023.

3 The FCA also announced these cessations on March 5, 2021.

4 On September 29, 2021. the FCA announced that it would compel IBA to publish these six “synthetic” LIBOR settings for the duration of 2022 (with the first publication being on January 4, 2022). On January 1, 2022, the FCA notified IBA of the changed methodology it required IBA to use to calculate the “synthetic” LIBOR settings.

Using LIBOR

Under the BMR, new use of “Article 23A benchmarks” by UK-supervised entities in regulated financial contracts, instruments and investment fund performance measurement is prohibited. This includes the “synthetic” 1-, 3- and 6-Months GBP and JPY LIBOR settings. Legacy use of these settings in equivalent circumstances is also prohibited, unless permitted by the FCA. The FCA currently permits all legacy use of “synthetic” 1-, 3- and 6-Months GBP and JPY LIBOR by UK-supervised entities other than in “Cleared Derivatives” (whether directly or indirectly cleared) (as defined in the FCA’s BMR Article 23C notice)5.

From January 1, 2022, the FCA has prohibited the new use by UK-supervised entities in regulated financial contracts, instruments and investment fund performance measurement, of the continuing Overnight and 1-, 3-, 6- and 12-Months USD LIBOR settings, subject to certain exceptions6.

The use of LIBOR in jurisdictions outside the United Kingdom and by entities subject to the oversight of other regulatory authorities may be restricted or prohibited by law in those jurisdictions and by the requirements of such regulatory authorities.

5 The FCA announced it would permit this legacy use on November 16, 2021.

6 The FCA announced this prohibition on November 16, 2021.

“Synthetic” LIBOR under the BMR

The FCA published the modifications it has made to the BMR from January 1, 2022 as it applies to the “synthetic” 1-, 3- and 6-Months GBP and JPY LIBOR settings, having regard to the effects of its designations of these six settings as “Article 23A benchmarks” and the imposition of its changes to the methodology for these settings.

Please see the document entitled “Further information on LIBOR” for further information in relation to LIBOR cessation and the exercise by the FCA of its powers under the BMR to compel the publication of “synthetic” LIBOR.

Please also read ICE Benchmark Administration’s (IBA) benchmark and other information notice and disclaimer.

Please also see the FCA’s LIBOR transition website for further information regarding LIBOR transition.

The material and information located on this website is provided for informational purposes only and is not intended to be and should not be relied upon as legal, financial or any other form of advice regarding your use of LIBOR. Please ensure you take legal and financial advice in all relevant jurisdictions to ensure you understand the impact of the cessation or unrepresentativeness of any LIBOR settings on you and your counterparties, and to ensure you understand the implications of the exercise of the FCA’s powers under the BMR.

Methodology

The “Panel Bank” LIBOR Methodology (for USD LIBOR settings only)

Waterfall Submission Methodology: Levels

The Waterfall Methodology

IBA publishes only the Overnight and the 1-, 3-, 6- and 12-Months USD LIBOR settings using panel bank contributions under the “panel bank” LIBOR calculation methodology. The “panel bank” LIBOR calculation methodology is designed to produce an average rate that is representative of the rates at which large, leading, internationally active banks with access to the wholesale, unsecured funding market could fund themselves in that market in USD for the relevant tenors.

Note that IBA expects to continue to determine and publish the Overnight and the 1-, 3-, 6- and 12-Months USD LIBOR settings under the “panel bank” LIBOR calculation methodology until end-June 2023, at which point panel banks will stop contributing and the Overnight and 12-Months USD LIBOR settings will cease. The FCA has stated that it will consider the case for requiring the continued publication of the 1-, 3- and 6-Months USD LIBOR settings on a “synthetic” basis after June 2023, but if it does not require these settings to continue to be published, they will also cease at that time. The FCA is currently seeking information relating to USD LIBOR exposures in its consultation “Winding down 'synthetic' sterling LIBOR and US dollar LIBOR”.

Pursuant to the USD LIBOR Output Statement, each continuing USD LIBOR setting up to June 30, 2023 is and will be based on contributions from a panel of large, leading, internationally active banks with access to the wholesale, unsecured funding market for USD. These contributions are determined through the use of a standardised, transaction data-driven submission waterfall introduced by IBA. This submission waterfall is designed to produce a rate that is anchored in panel banks’ wholesale, unsecured funding transactions to the greatest extent possible, and to enable a rate to be published in all market circumstances. The submission waterfall has been used since March 2019. Details of IBA’s evolution of “panel bank” LIBOR can be found in the LIBOR documentation section below.

The panel for USD LIBOR is currently composed of 15 panel banks with reference to the USD LIBOR Contributor Bank Criteria, which are designed so that the contributed input data is able to produce a rate that is representative of the underlying market or economic reality the setting is intended to measure. Each panel bank contributes input data for all five continuing USD LIBOR tenors.

USD LIBOR is calculated in accordance with the USD LIBOR Calculation Methodology using panel bank contributions made in accordance with the USD LIBOR Code of Conduct. The published rate in respect of each tenor is calculated as the arithmetic mean of each panel bank’s contribution in respect of that tenor (after trimming values from the upper and lower quartiles), rounded to five decimal places. Each panel bank's contribution carries an equal weight in the calculation, subject to the trimming.

If IBA receives fewer than the expected number of contributions, the USD LIBOR Reduced Submissions Policy will apply.

Current USD LIBOR Panel Banks

Bank of America N.A. (London Branch)JPMorgan Chase Bank, N.A. (London Branch)
Barclays Bank plcLloyds Bank plc
Citibank N.A. (London Branch)MUFG Bank, Ltd
Cooperatieve Rabobank U.A.Royal Bank of Canada
Crédit Agricole Corporate & Investment BankSMBC Bank International plc
Credit Suisse AG (London Branch)The Norinchukin Bank
Deutsche Bank AG (London Branch)UBS AG
HSBC Bank plc

The “Synthetic” LIBOR Methodology

The FCA is compelling IBA to continue to publish the 1-, 3- and 6-Months GBP and JPY LIBOR settings for the duration of 2022 as "Article 23A benchmarks". These settings are determined under a changed, “synthetic” methodology imposed by the FCA as follows:

"Synthetic” LIBORCurrency and calculation

Tenor


Sterling
(ICE TSRR7 + ISDA Spread Adjustment8)

Japanese Yen
(TORF9 (adjusted to be on a 360 day count basis) + ISDA Spread Adjustment8)

1 Month1M ICE TSRR + 0.0326%1M TORF x (360/365) - 0.02923%
3 Months3M ICE TSRR + 0.1193%3M TORF x (360/365) + 0.00835%
6 Months6M ICE TSRR + 0.2766%6M TORF x (360/365) + 0.05809%

7 The ICE Term SONIA Reference Rate (TSRR), which is a forward-looking term SONIA reference rate, provided by IBA.

8 With respect to each "synthetic" LIBOR setting, the fixed spread adjustment that applies as part of the ISDA IBOR fallback for each LIBOR setting, and that is published for the purpose of the ISDA 2020 IBOR Fallbacks Protocol and ISDA IBOR Fallbacks Supplement. Bloomberg Index Services Limited maintains and calculates the fixed spread adjustment and the ISDA IBOR fallback for each LIBOR setting - please see the disclaimer here.

9 The Tokyo Term Risk Free Rate, which is a forward-looking term TONA rate, provided by Quick Benchmarks Inc.

Please see the FCA's Article 23D notice for full details of the changes the FCA has imposed on IBA regarding the way that the “synthetic” 1-, 3- and 6-Month GBP and JPY LIBOR settings are calculated.

The “synthetic” LIBOR methodology is not based on panel bank contributions and the resulting settings are not representative of the underlying market or economic reality they were intended to measure before these continuing GBP and JPY LIBOR settings were designated as Article 23A benchmarks, including for the purposes of the BMR. IBA no longer publishes the 1-, 3- and 6-Months (or any other tenor) GBP and JPY LIBOR settings using the “panel bank” LIBOR methodology using panel bank contributions.

Note the FCA is currently seeking views on ceasing the requirement for IBA to continue publication of the “synthetic” 1- and 6-Months GBP LIBOR settings at the end of March 2023, and on when it will be possible to cease the requirement to continue publication of “synthetic” 3-Months GBP LIBOR. The FCA has stated that the “synthetic” JPY LIBOR settings will cease at end-2022.

Governance and Oversight of LIBOR

IBA maintains an oversight committee for LIBOR (for both “panel bank” and “synthetic” LIBOR settings), which has responsibilities under the BMR to oversee the provision of the benchmark.

The committee has broad market representation, being comprised of panel banks, benchmark users, market infrastructure providers, independent non-executive directors of IBA, and other relevant experts. Representatives from the Board of Governors of the Federal Reserve System and the Bank of England also sit on the committee as observers.

Oversight Committee Meeting Public Minutes

Publication Days

LIBOR is normally published at 11:55 am London time on each applicable London business day for all applicable currencies and tenors, except as described below.

There is no LIBOR publication in any currency or tenor if the date is a London public holiday.

Where an otherwise valid publication day is a designated public holiday in the US, there is no publication in the USD LIBOR Overnight tenor only. All other USD tenors are published as normal (this concerns only USD LIBOR).

The FCA requires IBA to publish each “synthetic” GBP and JPY LIBOR setting at or around 11:55 am London time on each applicable London business day, except for London public holidays.

The LIBOR Holiday Calendar sets out the relevant London and US public holidays for each LIBOR currency and tenor.

LIBOR Documentation

LIBOR Oversight Committee

Assurance on Compliance with EU Benchmarks Regulation and Benchmark Methodologies (regarding “panel bank” LIBOR between December 1, 2019 and November 30, 2020)

LIBOR Consultations & Position Papers

LIBOR Press Releases

LIBOR® Data

The ICE Report Centre provides historical and delayed data for LIBOR

Find out more