United Kingdom (and EU regulation)

FCA Announcement on cessation of LIBOR and ISDA’s statement

By Davide Barzilai (UK), Colin Rice (SG), Hannah Meakin (UK) and Sophy Teng (SG) on March 5, 2021 Posted in Benchmarks – IBOR transition, United Kingdom

Today, the FCA has confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative:

immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and
immediately after 30 June 2023, in the case of the remaining US dollar settings.

The end-June 2023 deadline for the cessation of US dollar LIBOR follows the ICE Benchmark Administration (IBA) consultation last December.

The FCA acknowledges that this announcement will engage certain contractual triggers for the calculation and future application of fallbacks that are activated by pre-cessation or cessation announcements made by the FCA in contracts.

Separately, ISDA has confirmed that the FCA announcement today constitutes an index cessation event under the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol (Protocol) for all 35 LIBOR settings. Consequently, the fallback spread adjustments to be used in its IBOR fallbacks will be fixed as of today given the FCA’s announcement. Given that the Protocol came into effect on 25 January 2021 and that derivative contracts between counterparties which have chosen to adhere to the Protocol now incorporate these fallbacks, the fixing of the spread adjustments will provide clarity to parties.