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March 5, 2021
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by Daniel J. Malpezzi

On November 30, 2020 UK and US regulators published a series of statements providing guidance and milestones for the transition away from LIBOR and cessation of LIBOR rate publication.

The ICE Benchmark Administration Limited (IBA), the administrator of LIBOR, then announced that it would consult in early December 2020 on its intention to cease publication of USD LIBOR for one-week and two-month tenors following the LIBOR publication on December 31, 2021.  The announcement also indicated that the expected cessation date of USD LIBOR for the overnight and one-, three-, six- and 12-month tenors would occur immediately following the LIBOR publication on June 30, 2023.  The IBA has also previously announced that the expected termination date for all flavors of LIBOR other than USD LIBOR, such as GBP, EUR, CHF, and JPY LIBOR, will occur immediately following the LIBOR publication on December 31, 2021.

On March 5, 2021, the UK Financial Conduct Authority (FCA), the LIBOR regulator, announced the results of these consultations on LIBOR cessation.  The FCA has confirmed, among other things, and the IBA and US regulators have endorsed, the following:

1. Publication of all seven euro LIBOR settings, all seven Swiss franc LIBOR settings, the two-month and 12-month Japanese yen LIBOR settings, the one-week, two-month and 12-month sterling LIBOR settings, the Spot Next and the one-week and two-month US Dollar LIBOR settings will cease immediately after December 31, 2021;
2. Publication of the overnight and 12-month US Dollar LIBOR settings will cease immediately after June 30, 2023;
3. The FCA will consider whether to require the IBA to continue to publish on a synthetic interpolated basis the one-month, three-month and six-month US Dollar LIBOR settings for a further period after June 30, 2023.  However, such benchmarks will no longer be considered to be “representative” after that date, which could have ramifications for triggering LIBOR replacement provisions in swaps and other financial instruments that presently contain such provisions, or in the case of swaps, are governed through opt-in by the standard ISDA LIBOR replacement protocols (IBOR Fallbacks Supplement (Supplement Number 70 to the 2006 ISDA Definitions and the ISDA 2020 IBOR Fallbacks Protocol); and
4. The FCA will also consider whether to require the IBA to publish on a synthetic basis various tenors of sterling LIBOR and Japanese yen LIBOR settings after December 31, 2021 for additional periods in order to protect market integrity where additional transition time may be necessary.

The FCA announcement makes clear to market participants that publication of any LIBOR settings on a synthetic basis would be intended solely to assist legacy contract holders and that use of any synthetic settings in new financial contracts by UK regulated firms would be prohibited.  The US regulators will no doubt take a similar position.

So, LIBOR transition continues apace, and the March 5 FCA announcement is useful to provide more specific guidance on various LIBOR benchmark termination dates.  The FCA has retained a fair amount of discretion as to further determinations in this area so additional announcements will be forthcoming.

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