Time to complete transition with LIBOR end dates in sight
The UK’s Financial Conduct Authority (FCA) has announced the dates when panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available. This is an important step towards the end of LIBOR and the transition away from discredited interest rate benchmarks of this type, and provides valuable certainty. The Bank of England and FCA are now urging market participants to continue to take the necessary action to ensure they are ready.
The great majority of LIBOR settings – all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings – will either cease to be provided by any administrator or will no longer be considered representative immediately after 31 December 2021. For the remaining US dollar settings this date is 30 June 2023.
Bank of England Governor Andrew Bailey said: “Today’s announcements mark the final chapter in the process that began in 2017, to remove reliance on unsustainable LIBOR rates and build a more robust foundation for the financial system. With limited time remaining, my message to firms is clear – act now and complete your transition by the end of 2021.”
The International Swaps and Derivatives Association (ISDA) has separately confirmed that the FCA’s announcement constitutes an index cessation event for all 35 settings in the various LIBOR currencies, fixing the spread adjustments to be used in IBOR fallbacks as of 5 March 2021 and providing clarity on the future terms of the many derivative contracts incorporating these fallbacks.
Why is this important? The vast majority of existing debt instruments and agreements make reference to LIBOR and must be updated to use the new benchmarks.
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