On 24 January 2020, the FCA published a letter from Richard Fox, FCA Head of Markets Policy, to the International Swaps and Derivatives Association (ISDA) (dated 20 January 2020) explaining why market participants should not assume that any period of non-representative LIBOR based on reduced panel bank submissions would last for more than a short period (i.e. a period of months, not years).
On the same day, the ICE Benchmark Administrator (IBA) published a letter with its response to ISDA, drawing particular attention to its ‘Changes and Cessation Procedure for LIBOR’, which refers to the requirement in Article 11(4) of the Benchmarks Regulation for an administrator to act within a ‘reasonable time period’ when it considers that input data is non-representative. The IBA explains that the FCA would be informed immediately if it knew or suspected that certain LIBOR settings would become unrepresentative. The period of time to effect a cessation would be dependent on the circumstances at the time. The IBA’s preference would be for any cessation of LIBOR to be pre-announced in a reasonable time in advance of the benchmark becoming unrepresentative. The IBA states that it would not be comfortable publishing an unrepresentative benchmark and does not contemplate the indefinite or continuing publication of such.