FCA announces end to publication of 24 LIBOR settings

The UK Financial Conduct Authority (FCA) announces that publication of 24 LIBOR settings has ended, and the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology from today.

The LIBOR settings that have ended are:

• all euro and Swiss franc LIBOR settings
• the overnight / spot next, 1-week, 2-month and 12-month sterling and Japanese yen LIBOR settings
• the 1-week and 2-month US dollar LIBOR settings

The 1, 3 and 6 month sterling and Japanese yen LIBOR settings are Article 23A benchmarks, meaning they are now permanently unrepresentative of the underlying market they seek to measure. This is because the panel of banks, which used to provide submissions to create these rates, has now ended.

From today, these six LIBOR settings will be calculated in a way that does not rely on submissions from panel banks. Market participants generally call this ‘synthetic’ LIBOR.

In the sterling, Japanese yen, Swiss franc and euro LIBOR derivative markets, cleared contracts were converted to risk-free rates towards the end of 2021. Most uncleared derivative contracts in these currencies will also start using risk-free rates from today, under industry-agreed fallback language adopted through the ISDA protocol. The protocol is still open for adherence for any firm that has not yet done so.

Synthetic yen LIBOR will cease at the end of 2022. Availability of synthetic sterling LIBOR is not guaranteed beyond end-2022, so firms’ efforts to transition away from it should continue. The FCA also reminds market participants that new use of synthetic LIBOR is banned.

The remaining 5 US dollar LIBOR settings will continue to be calculated using panel bank submissions until mid-2023. However, new use of US dollar LIBOR is also now banned, with limited exceptions. The US dollar risk-free rate SOFR is already being widely used in new business. Firms should now focus on converting their legacy US dollar LIBOR contracts by mid-2023.