FCA Announces Cessation of “Synthetic” Sterling LIBOR

Basel Committee Consults on Interest-Rate Risk

Intercontinental Exchange, Inc., a leading global provider of data, technology, and market infrastructure, announced that the U.K. Financial Conduct Authority (FCA) has decided to require ICE Benchmark Administration Limited (IBA) to continue to publish 1- and 6-Month “synthetic” sterling LIBOR settings until March 31, 2023.

The FCA has announced that, following the results of a consultation, it has no intention to use its powers to compel IBA to continue to publish the 1- and 6-Month “synthetic” sterling LIBOR settings beyond this date, and that therefore these settings will permanently cease immediately after final publication on March 31, 2023.

The FCA also consulted on when it could cease to compel IBA to publish 3-Month “synthetic” sterling LIBOR and noted there was support for requiring the continuation of 3-Month “synthetic” sterling LIBOR for a limited period beyond the end of March 2023. The FCA is considering the appropriate date for such cessation in light of the feedback received, and will provide further information when it publishes its summary of feedback on that question.

The publication of all Swiss franc and euro LIBOR settings, the 1 Week and 2 Month U.S. dollar LIBOR settings, and the Overnight/Spot Next, 1 Week, 2 Month and 12 Month sterling and Japanese yen LIBOR settings permanently ceased after December 31, 2021. The FCA has compelled IBA to publish the 1-, 3- and 6-Month sterling and Japanese yen settings for the duration of 2022 using a changed, unrepresentative “synthetic” methodology. The FCA has stated that the “synthetic” JPY LIBOR settings will cease at the end of 2022.

Publication of the Overnight and the 1-, 3-, 6- and 12-Month U.S. dollar LIBOR settings currently continues using panel bank contributions under the “panel bank” LIBOR methodology. IBA expects to continue to determine and publish these settings on this basis until the end of June 2023, at which point panel banks will stop contributing and the Overnight and 12-Month U.S. dollar LIBOR settings will permanently cease.

The FCA has stated that it will consider the case for requiring continued publication of the 1-, 3-, and 6-Month U.S. dollar LIBOR settings using an unrepresentative, “synthetic” methodology after June 2023.

As part of its consultation, the FCA sought information relating to U.S. dollar LIBOR exposures that might persist beyond the end of June 2023, and information to help it assess the case for, and consequences for market participants of, a decision to compel IBA to produce “synthetic” U.S. dollar LIBOR for a limited period. The FCA is assessing the feedback received and plans to respond later in the Autumn of 2022.

Source: ICE

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