On 1 October 2024, the Bank of England (BoE), the Financial Conduct Authority (FCA) and the Working Group on Sterling Risk-Free Reference Rates (Working Group) issued a statement highlighting that the remaining synthetic LIBOR settings were published for the last time on 30 September 2024 and LIBOR came to an end. All 35 LIBOR settings have now permanently ceased.
The statement notes that the transition away from LIBOR, which was once referenced in an estimated $400 trillion of financial contracts, has made financial markets “safer, more stable and fit for modern use”. It explains that UK regulators, their international counterparts and market participants have worked together over the past decade to move to risk-free rates (RFRs), based on robust data.
Synthetic LIBOR acted as a temporary bridge to give firms more time to move outstanding legacy LIBOR-linked contracts towards alternative RFRs, to allow for an orderly cessation.
The BoE, the FCA and the Working Group also flag that, having phased out LIBOR, the Working Group has met its objective and will be wound down with effect from 1 October 2024.
Looking ahead, market participants are reminded that:
- They should continue to ensure they use the most robust rates for the relevant currency, such as SONIA for GBP and SOFR for USD.
- They should ensure their use of term RFRs, such as term SONIA and term SOFR, are limited and remain consistent with the relevant guidance on best practice on the scope of use.
- Credit sensitive rates (CSRs) should not emerge as successor rates – this is supported by the Financial Policy Committee’s (FPC) view that these rates are not robust or suitable for widespread use as a benchmark. In particular, the FCA and the FPC have communicated to the market that USD CSRs have the potential to reintroduce many of the financial stability risks associated with LIBOR.