Financial Conduct Authority
Changes to LIBOR as of end-2021
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
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 yesterday, these 6 LIBOR settings will be calculated in a way that does not rely on submissions from panel banks. Market participants generally call this 'synthetic' LIBOR. We have published a Notice requiring LIBOR’s administrator to change the way these LIBOR settings are calculated, in line with the draft Notice we published in September 2021.
We have also published a Notice allowing use of these synthetic rates in all legacy contracts except cleared derivatives. This aligns with the draft Notice we published in November 2021. 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 yesterday, under industry-agreed fallback language adopted through the ISDA protocol. The protocol is still open for adherence for any firm that hasn’t 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. We also remind 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.
We will continue to monitor the impact of these changes, and the progress of remaining transition work, working closely with the Bank of England and our international counterparts.
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