On 26 January 2021, the FCA published a speech by Edwin Schooling Latter (Director Markets and Wholesale Policy, FCA) entitled ‘LIBOR – are you ready for life without LIBOR from end-2021?’

Key points in the speech include:

  • 25 January 2021 was a landmark day in the LIBOR journey. It was not only the day that IBA’s consultation on its cessation proposals closed. It was also the day that new ISDA language on interbank offered rate (IBOR) fallbacks became effective.
  • The ISDA protocol is still open for signature. The importance of signing the protocol is unchanged.
  • In approximate parallel to IBA’s consultation, the FCA is consulting on a framework under which, and the circumstances in which, it might consider it desirable and feasible to require continued publication of any LIBOR currency tenors on the basis of a changed methodology. Whilst not pre-judging the IBA’s consultation or what the FCA or IBA announcements will be, the FCA sees no case for delaying decisions or announcements beyond the time necessary to properly assess the consultation responses received. Whether the relevant currency-tenor setting is subject to a cessation announcement, a pre-cessation announcement, or both, announcements covering all settings could be made on the same day. Spread calculations would therefore be fixed on the same day. These spreads would not actually be applied until after the last date of proposed panel bank publication, as the LIBOR rates are expected to remain representative until that point.
  • A key point to understand is that synthetic LIBOR is not for use in new contracts. It is intended to help the problem of genuine tough legacy contracts, i.e. those that it is not practicable to convert before publication of a representative LIBOR ceases.