knowledge 8 June 2023 |

FCA issues final reminder before end of US dollar LIBOR

On 31 May 2023, the UK’s Financial Conduct Authority (“FCA”) issued a final message before the cessation of the US dollar LIBOR panel on 30 June 2023 (here).

Following a November 2022 consultation on proposals for a synthetic US dollar LIBOR, the FCA confirmed in April 2023 that IBA, the administrator of LIBOR, would be required to continue to publish the 1-, 3- and 6-month US dollar LIBOR settings in synthetic form until end-September 2024.  Further information on this extension of synthetic LIBOR is available in our earlier briefing here.

Now, the FCA reiterates that ahead of the 30 June 2023 deadline, market participants must be prepared for the following events:

  • The overnight and 12 month-US dollar LIBOR settings will cease after final publication on 30 June 2023;
  • The 1-, 3-, and 6-month US dollar LIBOR settings will be published in synthetic form from 3 July 2023 until end-September 2024, for use in legacy contracts only (other than in cleared derivatives); and
  • All new use of these remaining US dollar LIBOR settings will be prohibited for entities supervised by the FCA from 1 July 2023. This overrides the exemptions that the FCA permitted to the restriction on new use imposed from 1 January 2022 (see here).

As previously highlighted by the FCA, synthetic LIBOR settings are not representative.  They are intended to operate only as a temporary solution to allow more time to complete the transition from, and ensure the orderly wind-down of, LIBOR.  Firms must continue to actively transition contracts that reference LIBOR to appropriate, robust reference rates.

The FCA has also published a detailed Feedback Statement (here) which summarises the feedback received from the November consultation and the reasons behind the FCA’s decision and outlines the FCA’s intention to publish formal legal notices completing the implementation of the decisions on 1 July 2023.

Comment

Market participants should already be aware of the cessation of LIBOR and should be taking all relevant steps to ensure a smooth transition to different rates, if not done so already.  With less than one month to go, this should be a priority.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.