LIBOR is in the process of being wound down.
IBA no longer publishes any LIBOR settings using panel bank contributions under the “panel bank" LIBOR methodology1.
The FCA designated the 1-, 3- and 6-Months USD LIBOR settings as “Article 23A benchmarks” for the purposes of the UK Benchmarks Regulation (“BMR”) with effect from 1 July 2023, and is compelling IBA to continue to publish these settings for a temporary period after 30 June 2023 under an unrepresentative “synthetic” methodology2 . The FCA intends for these settings to cease on 30 September 2024.
The FCA designated the 3-Months GBP LIBOR setting as an “Article 23A benchmark” for the purposes of the BMR with effect from 1 January 2022, and compelled IBA to publish this setting, initially for the duration of 2022, under an unrepresentative "synthetic" methodology2. The FCA is compelling IBA to continue to publish this setting for the duration of 2023, and intends to require IBA to continue to publish this setting until 28 March 2024, after which it would cease.
All other LIBOR settings have ceased to be published3.
1 See the FCA announcement on future cessation and loss of representativeness of the LIBOR benchmarks on 5 March 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 31 December 2021. Publication of the Overnight and 12-Months USD LIBOR settings ceased after 30 June 2023.
2 The “synthetic” methodology is not based on panel bank contributions and resulting settings are and will not be 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.
3 Publication of the 1-, 3- and 6-Months “synthetic” JPY LIBOR settings ceased after 30 December 2022. Publication of the 1- and 6-Months “synthetic” GBP LIBOR settings ceased after 31 March 2023.
Using "Synthetic" LIBOR
Under the BMR, use of an “Article 23A benchmark” by UK-supervised entities in regulated financial contracts, instruments and investment fund performance measurement is prohibited unless the start date of such prohibition is delayed by the FCA or the FCA permits some or all legacy use. This prohibition applies to any “synthetic” GBP or “synthetic” USD LIBOR setting. This prohibition took effect from 1 July 2023 in relation to the “synthetic” USD LIBOR settings and overrides the exceptions to the prohibition on the new use of USD LIBOR that was imposed by the FCA from 1 January 20224.
The FCA permits all legacy use of “synthetic” 1-, 3- and 6-Months USD LIBOR and “synthetic” 3-Months GBP LIBOR by UK-supervised entities other than in “Cleared Derivatives” (whether directly or indirectly cleared) (as set out in the FCA’s BMR Article 23C notices).
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.
4 From 1 January 2022, the FCA prohibited the new use by UK-supervised entities of continuing Overnight and 1-, 3-, 6- and 12-Months USD LIBOR settings in regulated financial contracts, instruments and investment fund performance measurement, subject to certain exceptions.
“Synthetic” LIBOR under the BMR
The FCA published the modification it has made to the BMR as it applies to “synthetic” 1-, 3- and 6-Months USD LIBOR (from 1 July 2023) and to “synthetic” 3-Months GBP LIBOR (from 1 January 2022)5, having regard to the effects of their designation as “Article 23A benchmarks” and the imposition of its changes to the methodologies for these settings.
5 And as it applied to “synthetic” 1- and 6-Months GBP LIBOR and “synthetic” 1-, 3- and 6-Months JPY 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 information 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.