Two dates have become critical in the face of Friday’s announcement from the Financial Conduct Authority (FCA). The following are the dates that panel bank submissions for all Libor settings will cease, after which representative Libor rates will no longer be available.

• December 31, 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the one-week and two-month USD settings.
• June 30, 2023, in the case of the remaining USD settings.

“We now know when a representative USD LIBOR will end, and what its associated spread adjustments will be in no uncertain terms,” said Tom Wipf, Alternative Reference Rates Committee (ARRC) chairman and vice chairman of Institutional Securities at Morgan Stanley.

While the FCA does not expect any Libor settings to become unrepresentative before the relevant dates set out above, it has made clear that representative Libor rates will not be available beyond these dates. Further, the International Swaps and Derivatives Association (ISDA) confirmed, with this announcement, that the spread adjustments to be used in its IBOR fallbacks will be fixed as of March 5 as a result of the FCA’s announcement, providing clarity on the future terms of the many derivative contracts that now incorporate these fallbacks.

Regarding “tough legacy” contracts, authorities have recognized these contracts as particularly difficult to amend ahead of the Libor panels ceasing. The FCA is expected to consult on using its proposed new powers granted under the Benchmarks Regulation (BMR) to require continued publication on a “synthetic” basis for some sterling Libor settings and, for another year, some Japanese yen Libor settings. Using these powers for some USD Libor settings is also under consideration.

Synthetic Libor is intended for use in tough legacy contracts only and will no longer be representative for the purposes of the BMR. Which legacy contracts will be permitted to use the synthetic Libor rate will be decided in Q2.

The Association for Financial Professional’s director of Treasury Services, Tom Hunt, met with the ARRC on Friday regarding the announcement. “FCA’s announcement provides much more certainty in the marketplace and allows corporates to begin to work on the transition endgame,” said Hunt.

Stay up to date on the latest news surrounding the transition away from Libor with AFP's Focus on Libor. Explore videos, articles and guides that will prepare your organization for a future without Libor.

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