ICE LIBOR® (also known as LIBOR®) is a widely-used benchmark for short-term interest rates.
The current LIBOR methodology, which uses input data provided by LIBOR panel banks (Contributor Banks), 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 such market in particular currencies for certain tenors.
LIBOR is currently 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). This results in the publication of 35 individual rates (one for each currency and tenor combination) every applicable London business day.
Used globally, LIBOR is often referenced in derivative, bond and loan documentation, and in a range of consumer lending instruments such as mortgages and student loans. It is also used as a gauge of market expectation regarding central bank interest rates, liquidity premiums in the money markets and, during periods of stress, as an indicator of the health of the banking system.
Please note that, on March 5, 2021, the UK Financial Conduct Authority (FCA) announced that all LIBOR settings will either cease to be provided or will no longer be representative after certain specified dates. Please read the section below entitled “The Future of LIBOR” for further information.
Please also note that, on April 29, 2021, the Financial Services Act 2021 passed into law, which provides the FCA with new powers to oversee the orderly wind-down of critical benchmarks, such as LIBOR, including powers to direct a methodology change and compel the administrator to continue to publish the benchmark under the changed methodology. Please read the section below entitled “New FCA Powers to Impose Changes to LIBOR” for further information.
In July 2017, the FCA announced its intention that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021. Since then, the FCA and other official sector bodies have strongly encouraged market participants to transition from LIBOR to alternative rates.
IBA has engaged with end-users, banks, the FCA and other official sector bodies regarding the potential for continuing certain widely-used LIBOR settings after December 31, 2021. This has included surveys of banks and end-users of LIBOR to identify the LIBOR settings that are most widely-used and for which users would like to see IBA work to seek an agreement with globally active banks to support publication after year-end 2021. The focus of this engagement has been on seeking to facilitate transition by providing support for users with outstanding LIBOR-linked contracts that are impossible or impractical to modify before year-end 2021 (so-called “tough legacy” contracts).
IBA has been clear throughout its engagement that: (i) any such settings would need to be compliant with relevant regulations (in particular those regarding representativeness), (ii) there was no guarantee that any LIBOR settings would continue to be published after year-end 2021, and (iii) users of LIBOR should not rely on the continued publication of any LIBOR settings when developing transition or fallback plans.
Following discussions with the FCA and other official sector bodies, and after receiving communications from a majority of LIBOR panel banks that they would not be willing to continue contributing to LIBOR after certain specified dates, IBA considered that it would be unable to publish LIBOR settings on a representative basis after such dates. As a result, on December 4, 2020, IBA published a consultation on its intention to cease the publication of LIBOR.
On March 5, 2021, IBA published a feedback statement for the consultation and announced that, in the absence of sufficient panel bank support and without the intervention of the FCA to compel continued panel bank contributions to LIBOR, it would not be possible for IBA to publish the relevant LIBOR settings on a representative basis beyond the intended cessation dates specified for such settings in the consultation. As a result of IBA not having access to input data necessary to calculate LIBOR settings on a representative basis beyond the specified intended cessation dates for such settings, IBA stated that it would have to cease the publication of the relevant LIBOR settings immediately following such dates, unless the FCA exercises its new legal powers (which are included in the UK Benchmarks Regulation through amendments contained in the Financial Services Act 2021 - see the section entitled “New FCA Powers to Impose Changes to LIBOR” below) to require IBA to continue publishing such LIBOR settings using a changed methodology (also known as a “synthetic” basis).
Also on March 5, 2021, the FCA announced that it has no intention of using its new legal powers to require IBA to continue the publication of any EUR or CHF LIBOR settings, or the Overnight/Spot Next, 1 Week, 2 Month and 12 Month LIBOR settings in any other currency, beyond the intended cessation dates specified for such settings in the consultation, and that consequently:
As a result, IBA will no longer be able to determine or publish the LIBOR settings specified above after the dates set out above, and users will no longer be able to receive these LIBOR settings from IBA after these dates.
The FCA also announced that it would consult on using its new legal powers to require IBA to continue the publication of the 1 Month, 3 Month and 6 Month GBP and JPY LIBOR settings beyond December 31, 2021 under a changed methodology (also known as publication on a “synthetic” basis), noting that any settings published on a “synthetic” basis would no longer be representative of the underlying market or economic reality the setting is intended to measure, including for the purposes of the UK Benchmarks Regulation (as explained further in the below section entitled “New FCA Powers to Impose Changes to LIBOR”). The FCA has since consulted on its proposals to compel IBA to publish these “synthetic”, unrepresentative settings (in the case of Japanese Yen LIBOR, for one additional year only, after which the FCA has stated all remaining JPY LIBOR settings will cease).
As a result, IBA will no longer be able to determine or publish the 1 Month, 3 Months and 6 Months GBP LIBOR and JPY LIBOR settings after the dates set out above under the current LIBOR methodology using panel bank contributions and either:
The FCA has also advised that it will continue to consider the case for using its new legal powers to require IBA to continue the publication of the 1 Month, 3 Month and 6 Month USD LIBOR settings beyond June 30, 2023, on a “synthetic”, unrepresentative basis.
The FCA has confirmed, based on undertakings received from the LIBOR panel banks, that it does not expect that any LIBOR settings will become unrepresentative before the relevant dates set out above (for cessation or for potential continued publication on a “synthetic”, unrepresentative basis).*
Stakeholders who are interested as to statements relating to the cessation or unrepresentativeness of LIBOR for the purpose of contractual triggers for fallback rate arrangements should see the FCA statement issued on March 5, 2021 and related statements from ISDA.
LIBOR licensees should also review and consider communications received from IBA in relation to LIBOR.
*All currency panels are expected to remain as currently constituted for all LIBOR settings until December 31, 2021, and Bank of America N.A. (London Branch), Barclays Bank plc, Citibank N.A. (London Branch), Cooperatieve Rabobank U.A., Crédit Agricole Corporate & Investment Bank, Credit Suisse AG (London Branch), Deutsche Bank AG (London Branch), HSBC Bank plc, JPMorgan Chase Bank, N.A. (London Branch), Lloyds Bank plc, MUFG Bank, Ltd, Royal Bank of Canada, SMBC Bank International plc, The Norinchukin Bank and UBS AG are expected to remain on the USD panel for the continuing USD LIBOR settings until end-June 30, 2023, with National Westminster Bank plc expected to leave the USD panel after December 31, 2021.
On April 21, 2021, the Financial Services Act 2021 passed into law and amended the UK Benchmarks Regulation to provide the FCA with new legal powers to oversee the orderly wind-down of critical benchmarks, such as LIBOR, including powers to direct a methodology change and compel the administrator to continue to publish the benchmark under the changed methodology. The UK Government has also stated that it intends to bring forward further legislation to supplement these measures by reducing the scope for uncertainty or litigation that may arise from the exercise of the powers.
The new legal powers enable the FCA, among other things, to designate a critical benchmark, such as LIBOR, in order to direct a methodology change so that such designated benchmark is published on a “synthetic”, unrepresentative basis, in circumstances: (i) where the FCA has found that the benchmark is not representative of the market it seeks to measure or that the representativeness of the benchmark is at risk unless it considers that such representativeness can reasonably be restored and maintained and there are good reasons to do this; and (ii) where such action is necessary to protect consumers and/or to ensure market integrity.
The use of such a designated benchmark by UK supervised entities in regulated contracts would be prohibited, except that the FCA has the discretion to permit certain legacy use to further its market integrity or consumer protection objectives. The FCA also has the power to prohibit new use of a critical benchmark the provision of which is to cease (such as LIBOR).
The FCA continues to consult and publish statements of policy in relation to its new legal powers and steps it may take under them.
In particular, on June 24, 2021, the FCA launched a consultation in relation to its proposed decision to use its new powers to require IBA to continue the publication of the 1 Month, 3 Month and 6 Month GBP LIBOR settings and the 1 Month, 3 Month and 6 Month JPY LIBOR settings on a changed, “synthetic” basis after year-end 2021. The FCA is proposing to require that “synthetic” GBP LIBOR and “synthetic” JPY LIBOR are calculated using a forward-looking term version of the relevant alternative risk-free rate for that currency (i.e. the ICE Term SONIA Reference Rate (ICE TSRR), published by IBA, for GBP LIBOR, and the Tokyo Term Risk Free Rate (TORF), published by Quick Benchmarks Inc., for JPY LIBOR) plus the fixed ISDA spread adjustment published for the purposes of the ISDA IBOR Fallbacks Supplement and Protocol for the applicable LIBOR setting. The FCA has acknowledged that GBP LIBOR and JPY LIBOR settings published on such a changed, “synthetic” basis would no longer be representative of the underlying market and economic reality that such LIBOR settings are intended to measure.
Please see the FCA’s LIBOR transition website for the latest information on how it intends to exercise its new regulatory powers in relation to LIBOR.
The ICE LIBOR Output Statement currently defines LIBOR as:
"A wholesale funding rate anchored in LIBOR panel banks’ unsecured wholesale transactions to the greatest extent possible, with a waterfall to enable a rate to be published in all market circumstances".
Pursuant to the ICE LIBOR Output Statement, LIBOR is currently based on submissions from Contributor Banks that are determined through the use of a standardised, transaction data-driven Waterfall Methodology introduced by IBA. This has been the case since March 2019. Details of IBA’s evolution of LIBOR can be found in the LIBOR documentation section below.
The Waterfall Methodology requires Contributor Banks to base their submissions on eligible wholesale, unsecured funding transactions to the extent available:
Each LIBOR calculation is currently based on input data contributed by a panel of between 11 and 16 Contributor Banks for each of the five LIBOR currencies. Each Contributor Bank contributes input data for all seven LIBOR tenors in each currency in respect of which it is on a panel.
Each currency panel is composed with reference to the LIBOR Contributor Bank Criteria, which are designed so that the contributed input data is able to produce a rate that is representative of the economic reality.
Each Contributor Bank determines its input data contributions pursuant to the ICE LIBOR Output Statement in order to produce a rate that is anchored in Contributor Banks’ wholesale, unsecured funding transactions to the greatest extent possible, with a waterfall to enable a rate to be published in all market circumstances.
LIBOR is calculated in accordance with the LIBOR Methodology. The published rate in respect of each currency and tenor combination is the arithmetic mean of each Contributor Bank’s contributions in respect of that currency and tenor (after trimming upper and lower values), rounded to five decimal places. Each Contributor Bank's contribution carries an equal weight in the calculation, subject to the trimming.
Details are shown in the table below:
Number of Contributors
Number of Contributor Rates Averaged
|16 Contributors||4 highest and 4 lowest rates||8|
|15 Contributors||4 highest and 4 lowest rates||7|
|14 Contributors||3 highest and 3 lowest rates||8|
|13 Contributors||3 highest and 3 lowest rates||7|
|12 Contributors||3 highest and 3 lowest rates||6|
|11 Contributors||3 highest and 3 lowest rates||5|
If IBA receives fewer than the expected number of submissions in respect of a particular currency, the ICE LIBOR Reduced Submissions Policy will apply to those rates.
LIBOR is normally published for each currency and tenor combination at 11:55 am London time on each applicable London business day.
|Bank of America N.A. (London Branch)|
|Barclays Bank plc|
|BNP Paribas SA (London Branch)|
|Citibank N.A. (London Branch)|
|Cooperatieve Rabobank U.A.|
|Crédit Agricole Corporate & Investment Bank|
|Credit Suisse AG (London Branch)|
|Deutsche Bank AG (London Branch)|
|HSBC Bank plc|
|JPMorgan Chase Bank, N.A. (London Branch)|
|Lloyds Bank plc|
|Mizuho Bank, Ltd.|
|MUFG Bank, Ltd|
|National Westminster Bank plc|
|Royal Bank of Canada|
|Santander UK Plc|
|SMBC Bank International plc|
|Société Générale (London Branch)|
|The Norinchukin Bank|
*All currency panels are expected to remain as currently constituted for all LIBOR settings until December 31, 2021, and Bank of America N.A. (London Branch), Barclays Bank plc, Citibank N.A. (London Branch), Cooperatieve Rabobank U.A., Crédit Agricole Corporate & Investment Bank, Credit Suisse AG (London Branch), Deutsche Bank AG (London Branch), HSBC Bank plc, JPMorgan Chase Bank, N.A. (London Branch), Lloyds Bank plc, MUFG Bank, Ltd, Royal Bank of Canada, SMBC Bank International plc, The Norinchukin Bank and UBS AG are expected to remain on the USD panel for the continuing USD LIBOR settings until end-June 2023, with National Westminster Bank plc expected to leave the USD panel after December 31, 2021.
IBA maintains an oversight committee for LIBOR, which has responsibility for:
The committee has broad market representation, being comprised of Contributor 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, the Swiss National Bank and the Bank of England also sit on the committee as observers.
LIBOR is published on each 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 public holiday in London.
Where a valid publication day is a public holiday in the major financial centre of a currency, there is no publication in the Overnight tenor only, for that currency. All other tenors are published as normal. This rule concerns only the Euro and US Dollar, since Yen and Swiss Franc do not have an Overnight tenor.
The following tables set out the relevant holidays for the different currencies and tenors. Specific dates for each year are available on the Holiday Calendars page. The Holiday Calendars also list the designated Value Dates, by currency and tenor, for each benchmark date.
Applies to all LIBOR currencies and tenors;
All other relevant Euro public holidays are also London public holidays, so LIBOR is not published on these days.
ICE LIBOR® Code of Conduct
ICE LIBOR® Benchmark Statement
ICE LIBOR® Output Statement
ICE LIBOR® Oversight Committee
Assurance on Compliance with EU Benchmarks Regulation and Benchmark Methodologies
Consultations & Position Papers