On 29 February 2024, the Financial Conduct Authority (FCA) published a report on the use of its power under Article 23D of the Benchmarks Regulation (BMR) for 3 month synthetic sterling LIBOR. 

The report sets out the results of the FCA’s review of whether the use of its power under Article 23D(2) of the BMR with respect to 3-month synthetic LIBOR has advanced its consumer protection and integrity objectives. The FCA is required to review and report on this every two years under Article 23D(2) of the BMR.

In the report, the FCA explains that, given the scale of the estimated outstanding legacy contracts referencing the LIBOR Version at the end of 2021 and the potential disruption they would have likely caused to consumers and the wider market if those contracts were not able to function, the use of its Article 23D power together with its Article 21(3) compulsion power has ensured continuity of these contracts by sustaining the LIBOR Version and advanced both its consumer protection and market integrity objectives. The report goes into further detail on how these objectives have been advanced.

Accordingly, the report concludes that the way in which the FCA has exercised its power to require ICE Benchmark Administration to publish 3-month sterling LIBOR under a changed, synthetic methodology for the period between 1 January 2022 and 1 January 2024 (the review period) has advanced both of its statutory objectives. 

FCA final message

The FCA has also issued a final message before the end-March 2024 deadline for 3-month synthetic sterling LIBOR and a reminder of the expected cessation of US dollar synthetic LIBOR at end-September 2024.

3-month synthetic sterling LIBOR

In the message, the FCA reminds firms that it is now one month until the 3-month synthetic sterling LIBOR setting – the last remaining synthetic sterling LIBOR setting – ceases permanently on 28 March 2024, marking another critical milestone in the transition away from LIBOR. Ahead of the deadline, it reminds firms with outstanding sterling LIBOR exposures that they must continue their active transition efforts.

US dollar synthetic LIBOR

The FCA also reminds market participants that the final US dollar synthetic LIBOR settings (1- , 3- and 6-month) are expected to cease in 7 months’ time. Market participants must ensure they are prepared for these settings to cease at the end of September 2024, and parties to contracts still referencing LIBOR should be taking steps to transition to robust, appropriate reference rates, re-negotiating with counterparties where necessary.