On 31 May 2023, the FCA published Feedback Statement FS23/2: Decisions on US dollar LIBOR – feedback to CP22/21 (FS23/2).

Previous consultation

In November 2022, the FCA consulted on proposals to use its powers under the Benchmarks Regulation (BMR) to:

  • Require LIBOR’s administrator, ICE Benchmark Administration Limited (IBA) to publish the 1-, 3- and 6- month US dollar LIBOR settings using a synthetic methodology for a temporary period until end-September 2024.
  • Use the relevant CME Term SOFR Reference Rate plus the respective ISDA fixed spread adjustment as the methodology for a synthetic US dollar LIBOR.
  • Permit all legacy contracts other than cleared derivatives to use a synthetic US dollar LIBOR.

After the consultation closed on 6 January 2023, the FCA considered the responses and decided that no change was required to its proposals. In April 2023, it announced its final decision which was in line with the proposals consulted on.

Next steps

FS23/2 summarises the responses received to the consultation and the FCA’s feedback to those responses, and sets out next steps.

The FCA reminds market participants to be prepared for the following:

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

On 1 July 2023, the FCA will publish formal legal notices which will complete the implementation of the decisions announced on 3 April 2023.

In the meantime, market participants should take all necessary steps to ensure they understand how their contract terms interact with LIBOR’s winddown. They should continue to actively transition contracts that reference US dollar LIBOR, and not rely on the synthetic settings. The 3-month synthetic LIBOR setting is expected to cease at the end of March 2024, so market participants using this LIBOR setting must take necessary action to prepare for this.