Benchmark reform has long been an important topic across all sectors of banking and finance. An important development occurred when the United Kingdom’s Financial Conduct Authority (“FCA”) issued an announcement on 5 March 2021 concerning the future cessation of thirty-five London Interbank offered rates (“LIBORs”).
This announcement confirms that all seven euro LIBORs will cease immediately on 31 December 2021. In addition, all seven Swiss franc LIBOR settings, the Spot Next, 1-week, 2-month and 12-month Japanese yen LIBOR settings, the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings, and the 1-week and 2-month US dollar LIBOR settings will cease immediately after 31 December 2021.
The FCA intends to consult on whether to use its powers to require the ICE Benchmark Administration (“IBA”) to continue to publish a synthetic GBP LIBOR post-2021. The FCA also intends to consult on requiring the IBA to continue to publish the Japanese yen LIBOR settings after end-2021 on a synthetic basis for one additional year. In any event, immediately after 31 December 2021, the LIBOR and Yen settings will no longer be representative and representativeness will not be restored.
Publication of the overnight and 12-month US dollar LIBOR settings will cease immediately after 30 June 2023. Immediately after 30 June 2023, those settings will no longer be representative and representativeness will not be restored. The FCA will consider whether to require publication of a synthetic USD LIBOR after the end of June 2023.
Various related documents and statements were issued at the same time as the FCA announcement.
The IBA published a feedback statement following its consultation regarding ceasing publication of LIBOR settings. The IBA notified the FCA that it intends to cease providing all LIBOR settings for all currencies, subject to any rights of the FCA to compel IBA to continue publication.
The FCA and the Bank of England issued a joint statement urging market participants to continue to take the necessary action to ensure they are ready in advance of LIBOR ceasing.
ISDA issued a statement confirming that the fallback ‘spread adjustment’ published by Bloomberg will be fixed as of the date of the announcement for all LIBOR settings. ISDA has also published guidance related to the various benchmark announcements.
The FCA has updated its website to include final statements of policy in relation to some of the proposed new powers, subject to the enactment of the Financial Services Bill by the UK Parliament.
For further information, please contact Turlough Galvin, Patrick Molloy, Donal O’Donovan, David O’Mahony, Michael Hastings, Rory McPhillips, Stuart Kennedy, Yvonne McWeeney, Christian Donagh, Alan Keating, Richard Kelly, Paul Carroll, Stephen Gardiner or your usual Matheson contact.