On 3 April 2023, the FCA announced that it has decided to require LIBOR’s administrator, ICE Benchmark Administration Limited (IBA), to continue the publication of the 1-, 3- and 6-month US dollar LIBOR settings for a short period after 30 June 2023, using an unrepresentative ‘synthetic’ methodology (‘synthetic US dollar LIBOR’).
The decision follows the FCA’s consultation (CP22/21), published in November 2022, on synthetic US dollar LIBOR. The US dollar LIBOR panel is due to cease on 30 June 2023.
The FCA will publish a detailed Feedback Statement later in Q2 2023, responding to feedback received on the consultation.
The FCA intends that the publication of the 1-, 3- and 6-month synthetic US dollar LIBOR settings will cease on 30 September 2024. Firms must therefore continue to actively transition contracts that reference US dollar LIBOR.
IBA will be required to calculate the 1-, 3- and 6-month synthetic US dollar LIBOR settings using the relevant CME Term SOFR Reference Rate plus the respective ISDA fixed spread adjustment.
The overnight and 12-month US dollar LIBOR settings will cease permanently after publication on 30 June 2023. From 1 July 2023, all new use of synthetic US dollar LIBOR will be prohibited under the Benchmarks Regulation, and only legacy contracts (except cleared derivatives) will be permitted to use the synthetic settings.
In its announcement, the FCA also reminded firms that the 3-month synthetic sterling LIBOR setting is expected to cease on 28 March 2024, and firms must continue their active transition efforts ahead of this date.