United Kingdom (and EU regulation)

FSB publishes statement on final preparations for the USD LIBOR transitions

On 27 April 2023, the Financial Stability Board (FSB) published a statement to encourage final preparations for the USD LIBOR transition.

The statement highlights the following:

There has been significant progress so far, and important work needs to be done to complete the USD LIBOR transition globally. The FSB encourages market participants to complete the transition of any remaining USD LIBOR-linked contracts now, in order to avoid a pile-up towards end-June 2023 that could introduce operational risks and wider market disruption.
The UK FCA, has announced that it will require continued publication of the 1-, 3- and 6-month USD LIBOR settings following the end of the USD LIBOR panel, using a robust, unrepresentative synthetic methodology based on the CME Term SOFR Reference Rate and the ISDA fixed spread adjustment. The FCA will permit use of the synthetic settings in all legacy contracts except cleared derivatives. The FCA intends that publication of these synthetic USD LIBOR settings will cease on 30 September 2024.
The FSB reminds market participants that they should not rely on the availability of synthetic LIBOR rates in place of active transition of legacy contracts. Any synthetic LIBOR provides only a short-term temporary bridge to alternative robust reference rates. Market participants need to continue to take active steps to address existing legacy contracts in preparation for the permanent cessation of USD LIBOR rates.
For synthetic sterling LIBOR, the FCA has announced its intention that the remaining 3-month setting will cease at end-March 2024. The FSB reminds those market participants who still have remaining legacy contracts referencing 3-month sterling LIBOR to take necessary steps to ensure that they are prepared for its permanent cessation.
Firms should continue to transition activity to robust reference rates, including the Secured Overnight Financing Rate for the USD, to support a sustainable transition and to promote financial stability.
It is essential that the transition is anchored in risk-free reference rates that are robust and underpinned by deep, credible and liquid markets to avoid the vulnerabilities experienced with LIBOR.