On 22 November 2021, the Financial Stability Board (FSB) issued a statement to support preparations for LIBOR cessation.

Key points in the statement include:

  • Significant progress has been made in transitioning to Risk-Free Rates (RFRs), but market participants still need to finalise preparations to cease new use of LIBOR by end-2021.
  • The FSB recognises the widespread use of USD and other LIBORs in emerging markets and developing economies (EMDEs) and therefore considers engagement with EMDEs to be a key part of LIBOR transition globally.
  • Transition should be primarily to overnight RFRs, the most robust benchmarks available, to avoid reintroducing the weaknesses of LIBOR.
  • The FSB recognises that in some cases there may be a role for RFR-derived term rates and has set out the circumstances where the limited use of RFR-based term rates would be compatible with financial stability. It is crucial that potential alternative rates to LIBOR are especially robust and reflect credible underlying markets underpinned by a sufficient volume of transactions.
  • The FSB emphasises that active transition of legacy contracts remains the best way for market participants to have control and certainty over their contract terms, and provides a permanent solution and the ability to move to overnight RFRs, compounded in arrears.
  • Synthetic LIBOR is being made available as a temporary bridging solution for legacy contracts only. It should not be directly or indirectly referenced in any new contracts.