LIBOR cessation – FCA issues formal announcement

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The UK’s Financial Conduct Authority (FCA) has on March 5th 2021 issued the formal announcement for the definitive cessation of LIBOR, effective end of 2021 for most currencies and tenors. The FCA will also be consulting on the possibility of asking the administrator of LIBOR (IBA benchmarks) to continue publishing a synthetic LIBOR rate for sterling (1 month, 3 month, and six month) for a period of one year after 31 December 2021 and for USD for a period of 1 year after 30 June 2023.

The FCA announcement can be found here.

The statement clarifies that all LIBOR in all currencies and tenors except for the 1 month, 3 month, 6 month, and 12 month USD LIBOR settings will cease effective 31 December 2021. For the mentioned USD LIBOR settings the end date is 30 June 2023.

In parallel to the FCA’s announcement, ISDA has issued a statement – here – indicating that the fallback spreads under the ISDA protocol will be fixed for all LIBOR settings on the basis of the Bloomberg spread adjustment published for today.

This announcement will also constitute the cessation trigger on the EU side for the European Commission to begin the process of designating the statutory fallback rates for LIBOR under the new mechanism that was signed into law earlier in February with the review of the EU Benchmarks Regulation. The European Commission will therefore likely issue a public consultation in the coming months to determine the specific statutory fallback rates for the relevant LIBOR currencies that will operate as the last resort safety net for the immediate period after definitive LIBOR cessation.