About LIBOR transition

The interest rate benchmark LIBOR is being wound down. Find out why firms must take appropriate action now to transition to appropriate alternative rates.

The majority of LIBOR panels have ended and their settings ceased or are permanently unrepresentative. The overnight, 1-month, 3-month, 6-month and 12-month US dollar LIBOR settings are continuing under a panel bank methodology until the end of June 2023.

Before end-2021, LIBOR was produced in 7 tenors (overnight/spot next, 1 week, 1-month, 2-month, 3-month, 6-month and 12-month) across 5 currencies. Each of these LIBOR settings was based on submissions provided by a panel of banks. These submissions were intended to reflect the interest rate at which banks could borrow money on unsecured terms in wholesale markets.

Background to LIBOR being wound down

In 2017, the FCA and the Bank of England’s Financial Policy Committee (FPC) noted that it had become increasingly apparent that the absence of active underlying markets and the scarcity of term unsecured deposit transactions raised serious questions about the future sustainability of the LIBOR benchmarks.

The LIBOR panel banks agreed to continue submitting to LIBOR until end-2021 (later extended to end-June 2023 for US dollar LIBOR only), to enable time for the market to move away from LIBOR.

In March 2021, the FCA and ICE Benchmark Administration (the administrator of LIBOR) announced that sterling, euro, Swiss franc and Japanese yen LIBOR panels, as well as panels for 1-week and 2-month US dollar LIBOR, will cease at end-2021, with the remaining US dollar LIBOR panels ceasing at end-June 2023.

We confirmed our decision to use powers, which the Government granted us under the Benchmarks Regulation, to require continued publication on a changed methodology (also known as a ‘synthetic’) basis for the 1-month, 3-month and 6-month sterling LIBOR settings and, until end-2022, the same Japanese yen LIBOR settings. These synthetic LIBOR rates are not intended for use in new contracts, but are available for some holders of ‘legacy’ LIBOR-referencing contracts.

In September 2022, we confirmed that publication of 1-month and 6-month synthetic sterling LIBOR will be required until end-March 2023, after which these settings will cease permanently.

In November 2022, we announced that we intend to compel the publication of 3-month synthetic sterling LIBOR until end-March 2024, after which it will cease permanently. We also published a consultation on our proposals to use our powers to require continued publication of the 1-month, 3-month, and 6-month US dollar LIBOR settings under a synthetic methodology for a temporary period until end-September 2024.

All market participants need to take appropriate action now to remove remaining dependencies on LIBOR. We have written a number of Dear CEO letters to regulated firms setting out our expectations.

The Financial Stability Board’s (FSB) Official Sector Steering Group (OSSG) coordinates international efforts on benchmark reform and the transition from LIBOR to RFRs. The OSSG is co-chaired by Nikhil Rathi, Chief Executive of the FCA, and John Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York.

The FSB published a global transition roadmap for LIBOR with actions for financial and non-financial sector firms to take to ensure a smooth LIBOR transition.